Correlation Between Agro Tech and California Software

Can any of the company-specific risk be diversified away by investing in both Agro Tech and California Software 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 Agro Tech and California Software into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Agro Tech and California Software

-0.41

Correlation Coefficient

Agro Tech  California Software

Very good diversification

The 3 months correlation between Agro and California is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Agro Tech Foods and California Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Software and Agro Tech 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 Agro Tech Foods are associated (or correlated) with California Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Software has no effect on the direction of Agro Tech i.e., Agro Tech and California Software go up and down completely randomly.

Pair Corralation between Agro Tech and California Software

Assuming the 90 days trading horizon Agro Tech Foods is expected to generate 1.27 times more return on investment than California Software. However, Agro Tech is 1.27 times more volatile than California Software. It trades about -0.13 of its potential returns per unit of risk. California Software is currently generating about -0.44 per unit of risk. If you would invest  93,815  in Agro Tech Foods on September 30, 2024 and sell it today you would lose (5,495) from holding Agro Tech Foods or give up 5.86% of portfolio value over 90 days.

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

Agro Tech Foods  vs.  California Software

Agro Tech Foods

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Agro Tech Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Agro Tech is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

California Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days California Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Agro Tech and California Software

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

The idea behind Agro Tech Foods and California Software 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.