Correlation Between Parag Milk and Total Transport

Can any of the company-specific risk be diversified away by investing in both Parag Milk and Total Transport 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 Total Transport 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 Total Transport Systems, you can compare the effects of market volatilities on Parag Milk and Total Transport 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 Total Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parag Milk and Total Transport.

Diversification Opportunities for Parag Milk and Total Transport

0.77

Correlation Coefficient

Parag Milk  Total Transport

Poor diversification

The 3 months correlation between Parag and Total is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Parag Milk Foods and Total Transport Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Transport Systems 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 Total Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Transport Systems has no effect on the direction of Parag Milk i.e., Parag Milk and Total Transport go up and down completely randomly.

Pair Corralation between Parag Milk and Total Transport

Assuming the 90 days trading horizon Parag Milk Foods is expected to generate 1.32 times more return on investment than Total Transport. However, Parag Milk is 1.32 times more volatile than Total Transport Systems. It trades about 0.16 of its potential returns per unit of risk. Total Transport Systems is currently generating about 0.13 per unit of risk. If you would invest  17,284  in Parag Milk Foods on April 5, 2025 and sell it today you would earn a total of  5,082  from holding Parag Milk Foods or generate 29.4% 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.  Total Transport Systems

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 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward indicators, Parag Milk demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Total Transport Systems

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Total Transport Systems are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Total Transport displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Parag Milk and Total Transport

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

The idea behind Parag Milk Foods and Total Transport Systems 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.