Correlation Between ZF Commercial and Patanjali Foods

Can any of the company-specific risk be diversified away by investing in both ZF Commercial and Patanjali 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 ZF Commercial and Patanjali Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ZF Commercial Vehicle and Patanjali Foods Limited, you can compare the effects of market volatilities on ZF Commercial and Patanjali 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 ZF Commercial with a short position of Patanjali Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZF Commercial and Patanjali Foods.

Diversification Opportunities for ZF Commercial and Patanjali Foods

-0.3

Correlation Coefficient

ZF Commercial  Patanjali Foods

Very good diversification

The 3 months correlation between ZFCVINDIA and Patanjali is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding ZF Commercial Vehicle and Patanjali Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patanjali Foods and ZF Commercial 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 ZF Commercial Vehicle are associated (or correlated) with Patanjali Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patanjali Foods has no effect on the direction of ZF Commercial i.e., ZF Commercial and Patanjali Foods go up and down completely randomly.

Pair Corralation between ZF Commercial and Patanjali Foods

Assuming the 90 days trading horizon ZF Commercial Vehicle is expected to generate 2.14 times more return on investment than Patanjali Foods. However, ZF Commercial is 2.14 times more volatile than Patanjali Foods Limited. It trades about 0.06 of its potential returns per unit of risk. Patanjali Foods Limited is currently generating about 0.03 per unit of risk. If you would invest  1,191,815  in ZF Commercial Vehicle on December 30, 2024 and sell it today you would earn a total of  107,540  from holding ZF Commercial Vehicle or generate 9.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ZF Commercial Vehicle  vs.  Patanjali Foods Limited

ZF Commercial Vehicle

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ZF Commercial Vehicle are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, ZF Commercial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Patanjali Foods

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Patanjali Foods Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Patanjali Foods is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ZF Commercial and Patanjali Foods

The main advantage of trading using opposite ZF Commercial and Patanjali Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZF Commercial position performs unexpectedly, Patanjali 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 Patanjali Foods will offset losses from the drop in Patanjali Foods' long position.

The idea behind ZF Commercial Vehicle and Patanjali 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.