Correlation Between Max Financial and Varun Beverages

Can any of the company-specific risk be diversified away by investing in both Max Financial and Varun Beverages 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 Max Financial and Varun Beverages into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Max Financial Services and Varun Beverages Limited, you can compare the effects of market volatilities on Max Financial and Varun Beverages 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 Max Financial with a short position of Varun Beverages. Check out your portfolio center. Please also check ongoing floating volatility patterns of Max Financial and Varun Beverages.

Diversification Opportunities for Max Financial and Varun Beverages

-0.94

Correlation Coefficient

Max Financial  Varun Beverages

Pay attention - limited upside

The 3 months correlation between Max and Varun is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Max Financial Services and Varun Beverages Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varun Beverages and Max Financial 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 Max Financial Services are associated (or correlated) with Varun Beverages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varun Beverages has no effect on the direction of Max Financial i.e., Max Financial and Varun Beverages go up and down completely randomly.

Pair Corralation between Max Financial and Varun Beverages

Assuming the 90 days trading horizon Max Financial Services is expected to generate 0.75 times more return on investment than Varun Beverages. However, Max Financial Services is 1.33 times less risky than Varun Beverages. It trades about 0.42 of its potential returns per unit of risk. Varun Beverages Limited is currently generating about -0.14 per unit of risk. If you would invest  113,235  in Max Financial Services on April 8, 2025 and sell it today you would earn a total of  43,615  from holding Max Financial Services or generate 38.52% return on investment over 90 days.

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

Max Financial Services  vs.  Varun Beverages Limited

Max Financial Services

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Max Financial Services are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Max Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Varun Beverages

Risk-Adjusted Performance

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 inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in August 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Max Financial and Varun Beverages

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

The idea behind Max Financial Services and Varun Beverages 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.