Correlation Between Varun Beverages and CSB Bank

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

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

Diversification Opportunities for Varun Beverages and CSB Bank

-0.68

Correlation Coefficient

Varun Beverages  CSB Bank

Excellent diversification

The 3 months correlation between Varun and CSB is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and CSB Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSB Bank Limited and Varun Beverages 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 Varun Beverages Limited are associated (or correlated) with CSB Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSB Bank Limited has no effect on the direction of Varun Beverages i.e., Varun Beverages and CSB Bank go up and down completely randomly.

Pair Corralation between Varun Beverages and CSB Bank

Assuming the 90 days trading horizon Varun Beverages Limited is expected to under-perform the CSB Bank. In addition to that, Varun Beverages is 1.2 times more volatile than CSB Bank Limited. It trades about -0.1 of its total potential returns per unit of risk. CSB Bank Limited is currently generating about 0.2 per unit of volatility. If you would invest  36,025  in CSB Bank Limited on April 20, 2025 and sell it today you would earn a total of  7,055  from holding CSB Bank Limited or generate 19.58% return on investment over 90 days.

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

Varun Beverages Limited  vs.  CSB Bank Limited

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 latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

CSB Bank Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CSB Bank Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, CSB Bank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Varun Beverages and CSB Bank

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

The idea behind Varun Beverages Limited and CSB Bank 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.