Correlation Between Fertilizers and Apollo Hospitals

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Can any of the company-specific risk be diversified away by investing in both Fertilizers and Apollo Hospitals 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 Fertilizers and Apollo Hospitals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fertilizers and Chemicals and Apollo Hospitals Enterprise, you can compare the effects of market volatilities on Fertilizers and Apollo Hospitals 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 Fertilizers with a short position of Apollo Hospitals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fertilizers and Apollo Hospitals.

Diversification Opportunities for Fertilizers and Apollo Hospitals

FertilizersApolloDiversified AwayFertilizersApolloDiversified Away100%
0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Fertilizers and Apollo is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Fertilizers and Chemicals and Apollo Hospitals Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apollo Hospitals Ent and Fertilizers 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 Fertilizers and Chemicals are associated (or correlated) with Apollo Hospitals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apollo Hospitals Ent has no effect on the direction of Fertilizers i.e., Fertilizers and Apollo Hospitals go up and down completely randomly.

Pair Corralation between Fertilizers and Apollo Hospitals

Assuming the 90 days trading horizon Fertilizers and Chemicals is expected to under-perform the Apollo Hospitals. In addition to that, Fertilizers is 1.88 times more volatile than Apollo Hospitals Enterprise. It trades about -0.01 of its total potential returns per unit of risk. Apollo Hospitals Enterprise is currently generating about 0.03 per unit of volatility. If you would invest  712,200  in Apollo Hospitals Enterprise on September 24, 2024 and sell it today you would earn a total of  12,970  from holding Apollo Hospitals Enterprise or generate 1.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.41%
ValuesDaily Returns

Fertilizers and Chemicals  vs.  Apollo Hospitals Enterprise

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -20-15-10-505
JavaScript chart by amCharts 3.21.15FACT APOLLOHOSP
       Timeline  
Fertilizers and Chemicals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Fertilizers and Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fertilizers is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec8008509009501,0001,050
Apollo Hospitals Ent 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Apollo Hospitals Enterprise are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Apollo Hospitals is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec6,6006,8007,0007,2007,400

Fertilizers and Apollo Hospitals Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.6-3.44-2.29-1.130.01.092.223.354.485.61 0.050.100.15
JavaScript chart by amCharts 3.21.15FACT APOLLOHOSP
       Returns  

Pair Trading with Fertilizers and Apollo Hospitals

The main advantage of trading using opposite Fertilizers and Apollo Hospitals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fertilizers position performs unexpectedly, Apollo Hospitals 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 Apollo Hospitals will offset losses from the drop in Apollo Hospitals' long position.
The idea behind Fertilizers and Chemicals and Apollo Hospitals Enterprise 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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