Correlation Between Agro Tech and Niraj Ispat

Can any of the company-specific risk be diversified away by investing in both Agro Tech and Niraj Ispat 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 Niraj Ispat 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 Niraj Ispat Industries, you can compare the effects of market volatilities on Agro Tech and Niraj Ispat 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 Niraj Ispat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agro Tech and Niraj Ispat.

Diversification Opportunities for Agro Tech and Niraj Ispat

0.8

Correlation Coefficient

Agro Tech  Niraj Ispat

Very poor diversification

The 3 months correlation between Agro and Niraj is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Agro Tech Foods and Niraj Ispat Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Niraj Ispat Industries 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 Niraj Ispat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Niraj Ispat Industries has no effect on the direction of Agro Tech i.e., Agro Tech and Niraj Ispat go up and down completely randomly.

Pair Corralation between Agro Tech and Niraj Ispat

Assuming the 90 days trading horizon Agro Tech Foods is expected to generate 2.38 times more return on investment than Niraj Ispat. However, Agro Tech is 2.38 times more volatile than Niraj Ispat Industries. It trades about 0.08 of its potential returns per unit of risk. Niraj Ispat Industries is currently generating about 0.17 per unit of risk. If you would invest  83,420  in Agro Tech Foods on September 5, 2024 and sell it today you would earn a total of  12,250  from holding Agro Tech Foods or generate 14.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Agro Tech Foods  vs.  Niraj Ispat Industries

Agro Tech Foods

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Agro Tech Foods are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Agro Tech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Niraj Ispat Industries

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Niraj Ispat Industries are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Niraj Ispat unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agro Tech and Niraj Ispat

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

The idea behind Agro Tech Foods and Niraj Ispat Industries 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..