Correlation Between Agarwal Industrial and Music Broadcast

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

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

Diversification Opportunities for Agarwal Industrial and Music Broadcast

0.72

Correlation Coefficient

Agarwal Industrial  Music Broadcast

Poor diversification

The 3 months correlation between Agarwal and Music is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Agarwal Industrial and Music Broadcast Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Music Broadcast 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 Music Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Music Broadcast has no effect on the direction of Agarwal Industrial i.e., Agarwal Industrial and Music Broadcast go up and down completely randomly.

Pair Corralation between Agarwal Industrial and Music Broadcast

Assuming the 90 days trading horizon Agarwal Industrial is expected to generate 1.22 times more return on investment than Music Broadcast. However, Agarwal Industrial is 1.22 times more volatile than Music Broadcast Limited. It trades about -0.02 of its potential returns per unit of risk. Music Broadcast Limited is currently generating about -0.18 per unit of risk. If you would invest  124,014  in Agarwal Industrial on September 4, 2024 and sell it today you would lose (5,614) from holding Agarwal Industrial or give up 4.53% of portfolio value over 90 days.

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

Agarwal Industrial  vs.  Music Broadcast 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Music Broadcast

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Music Broadcast Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Agarwal Industrial and Music Broadcast

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

The idea behind Agarwal Industrial and Music Broadcast 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.