Correlation Between Patanjali Foods and Megastar Foods
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By analyzing existing cross correlation between Patanjali Foods Limited and Megastar Foods Limited, you can compare the effects of market volatilities on Patanjali Foods and Megastar 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 Patanjali Foods with a short position of Megastar Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Patanjali Foods and Megastar Foods.
Diversification Opportunities for Patanjali Foods and Megastar Foods
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Patanjali and Megastar is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Patanjali Foods Limited and Megastar Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Megastar Foods and Patanjali Foods 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 Patanjali Foods Limited are associated (or correlated) with Megastar Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Megastar Foods has no effect on the direction of Patanjali Foods i.e., Patanjali Foods and Megastar Foods go up and down completely randomly.
Pair Corralation between Patanjali Foods and Megastar Foods
Assuming the 90 days trading horizon Patanjali Foods Limited is expected to generate 0.8 times more return on investment than Megastar Foods. However, Patanjali Foods Limited is 1.25 times less risky than Megastar Foods. It trades about 0.08 of its potential returns per unit of risk. Megastar Foods Limited is currently generating about -0.01 per unit of risk. If you would invest 141,562 in Patanjali Foods Limited on August 29, 2024 and sell it today you would earn a total of 33,678 from holding Patanjali Foods Limited or generate 23.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Patanjali Foods Limited vs. Megastar Foods Limited
Performance |
| Timeline |
| Patanjali Foods |
| Megastar Foods |
Patanjali Foods and Megastar Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Patanjali Foods and Megastar Foods
The main advantage of trading using opposite Patanjali Foods and Megastar Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patanjali Foods position performs unexpectedly, Megastar 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 Megastar Foods will offset losses from the drop in Megastar Foods' long position.The idea behind Patanjali Foods Limited and Megastar 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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Check out your portfolio center.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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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