Correlation Between Parag Milk and Sapphire Foods

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

By analyzing existing cross correlation between Parag Milk Foods and Sapphire Foods India, you can compare the effects of market volatilities on Parag Milk and Sapphire 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 Parag Milk with a short position of Sapphire Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parag Milk and Sapphire Foods.

Diversification Opportunities for Parag Milk and Sapphire Foods

0.66

Correlation Coefficient

Parag Milk  Sapphire Foods

Poor diversification

The 3 months correlation between Parag and Sapphire is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Parag Milk Foods and Sapphire Foods India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapphire Foods India and Parag Milk 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 Parag Milk Foods are associated (or correlated) with Sapphire Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapphire Foods India has no effect on the direction of Parag Milk i.e., Parag Milk and Sapphire Foods go up and down completely randomly.

Pair Corralation between Parag Milk and Sapphire Foods

Assuming the 90 days trading horizon Parag Milk Foods is expected to generate 1.65 times more return on investment than Sapphire Foods. However, Parag Milk is 1.65 times more volatile than Sapphire Foods India. It trades about 0.15 of its potential returns per unit of risk. Sapphire Foods India is currently generating about 0.05 per unit of risk. If you would invest  15,832  in Parag Milk Foods on March 24, 2025 and sell it today you would earn a total of  5,285  from holding Parag Milk Foods or generate 33.38% return on investment over 90 days.

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

Parag Milk Foods  vs.  Sapphire Foods India

Parag Milk Foods

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Parag Milk Foods are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Parag Milk demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Sapphire Foods India

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sapphire Foods India are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Sapphire Foods may actually be approaching a critical reversion point that can send shares even higher in July 2025.

Pair Trading with Parag Milk and Sapphire Foods

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

The idea behind Parag Milk Foods and Sapphire Foods India 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.