Correlation Between Paramount Communications and Agarwal Industrial

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

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

Diversification Opportunities for Paramount Communications and Agarwal Industrial

0.79

Correlation Coefficient

Paramount Communications  Agarwal Industrial

Poor diversification

The 3 months correlation between Paramount and Agarwal is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Paramount Communications Limit and Agarwal Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agarwal Industrial and Paramount Communications 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 Paramount Communications Limited are associated (or correlated) with Agarwal Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agarwal Industrial has no effect on the direction of Paramount Communications i.e., Paramount Communications and Agarwal Industrial go up and down completely randomly.

Pair Corralation between Paramount Communications and Agarwal Industrial

Assuming the 90 days trading horizon Paramount Communications Limited is expected to under-perform the Agarwal Industrial. In addition to that, Paramount Communications is 1.01 times more volatile than Agarwal Industrial. It trades about -0.16 of its total potential returns per unit of risk. Agarwal Industrial is currently generating about 0.0 per unit of volatility. If you would invest  123,755  in Agarwal Industrial on September 5, 2024 and sell it today you would lose (1,860) from holding Agarwal Industrial or give up 1.5% of portfolio value over 90 days.

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

Paramount Communications Limit  vs.  Agarwal Industrial

Paramount Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paramount Communications Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Paramount Communications and Agarwal Industrial

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

The idea behind Paramount Communications Limited and Agarwal Industrial 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.