Correlation Between Agarwal Industrial and Fineotex Chemical

Can any of the company-specific risk be diversified away by investing in both Agarwal Industrial and Fineotex Chemical 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 Agarwal Industrial and Fineotex Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Agarwal Industrial and Fineotex Chemical

0.4

Correlation Coefficient

Agarwal Industrial  Fineotex Chemical

Very weak diversification

The 3 months correlation between Agarwal and Fineotex is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Agarwal Industrial and Fineotex Chemical Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fineotex Chemical and Agarwal Industrial 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 Agarwal Industrial are associated (or correlated) with Fineotex Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fineotex Chemical has no effect on the direction of Agarwal Industrial i.e., Agarwal Industrial and Fineotex Chemical go up and down completely randomly.

Pair Corralation between Agarwal Industrial and Fineotex Chemical

Assuming the 90 days trading horizon Agarwal Industrial is expected to generate 2.77 times less return on investment than Fineotex Chemical. But when comparing it to its historical volatility, Agarwal Industrial is 1.09 times less risky than Fineotex Chemical. It trades about 0.0 of its potential returns per unit of risk. Fineotex Chemical Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  36,350  in Fineotex Chemical Limited on September 5, 2024 and sell it today you would lose (500.00) from holding Fineotex Chemical Limited or give up 1.38% of portfolio value over 90 days.

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

Agarwal Industrial  vs.  Fineotex Chemical Limited

Agarwal Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agarwal Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Agarwal Industrial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Fineotex Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fineotex Chemical Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Fineotex Chemical is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Agarwal Industrial and Fineotex Chemical

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

The idea behind Agarwal Industrial and Fineotex Chemical 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.