Correlation Between Clarke and Ag Growth

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

By analyzing existing cross correlation between Clarke Inc and Ag Growth International, you can compare the effects of market volatilities on Clarke and Ag Growth 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 Clarke with a short position of Ag Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clarke and Ag Growth.

Diversification Opportunities for Clarke and Ag Growth

-0.15

Correlation Coefficient

Clarke  Ag Growth

Good diversification

The 3 months correlation between Clarke and AFN is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Clarke Inc and Ag Growth International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ag Growth International and Clarke 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 Clarke Inc are associated (or correlated) with Ag Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ag Growth International has no effect on the direction of Clarke i.e., Clarke and Ag Growth go up and down completely randomly.

Pair Corralation between Clarke and Ag Growth

Assuming the 90 days trading horizon Clarke Inc is expected to generate 0.86 times more return on investment than Ag Growth. However, Clarke Inc is 1.16 times less risky than Ag Growth. It trades about 0.08 of its potential returns per unit of risk. Ag Growth International is currently generating about 0.03 per unit of risk. If you would invest  1,248  in Clarke Inc on September 14, 2024 and sell it today you would earn a total of  1,112  from holding Clarke Inc or generate 89.1% return on investment over 90 days.

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

Clarke Inc  vs.  Ag Growth International

Clarke Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clarke Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Clarke is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Ag Growth International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ag Growth International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Ag Growth is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Clarke and Ag Growth

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

The idea behind Clarke Inc and Ag Growth International 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 Global Correlations module to find global opportunities by holding instruments from different markets.