Correlation Between Varun Beverages and Univa Foods

Can any of the company-specific risk be diversified away by investing in both Varun Beverages and Univa Foods at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Varun Beverages and Univa Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Varun Beverages Limited and Univa Foods Limited, you can compare the effects of market volatilities on Varun Beverages and Univa Foods and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Varun Beverages with a short position of Univa Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Varun Beverages and Univa Foods.

Diversification Opportunities for Varun Beverages and Univa Foods

0.34

Correlation Coefficient

Varun Beverages  Univa Foods

Weak diversification

The 3 months correlation between Varun and Univa is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and Univa Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Univa Foods Limited and Varun Beverages is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Varun Beverages Limited are associated (or correlated) with Univa Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Univa Foods Limited has no effect on the direction of Varun Beverages i.e., Varun Beverages and Univa Foods go up and down completely randomly.

Pair Corralation between Varun Beverages and Univa Foods

Assuming the 90 days trading horizon Varun Beverages Limited is expected to under-perform the Univa Foods. In addition to that, Varun Beverages is 2.73 times more volatile than Univa Foods Limited. It trades about -0.01 of its total potential returns per unit of risk. Univa Foods Limited is currently generating about 0.18 per unit of volatility. If you would invest  879.00  in Univa Foods Limited on September 20, 2024 and sell it today you would earn a total of  89.00  from holding Univa Foods Limited or generate 10.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Varun Beverages Limited  vs.  Univa Foods Limited

Varun Beverages

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Varun Beverages Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Varun Beverages is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Univa Foods Limited

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Univa Foods Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Univa Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Varun Beverages and Univa Foods

The main advantage of trading using opposite Varun Beverages and Univa Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varun Beverages position performs unexpectedly, Univa Foods can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Univa Foods will offset losses from the drop in Univa Foods' long position.

The idea behind Varun Beverages Limited and Univa Foods Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.