Correlation Between Richards Packaging and Ag Growth

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

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

Diversification Opportunities for Richards Packaging and Ag Growth

-0.04

Correlation Coefficient

Richards Packaging  Ag Growth

Good diversification

The 3 months correlation between Richards and AFN is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Richards Packaging Income 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 Richards Packaging 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 Richards Packaging Income 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 Richards Packaging i.e., Richards Packaging and Ag Growth go up and down completely randomly.

Pair Corralation between Richards Packaging and Ag Growth

Assuming the 90 days trading horizon Richards Packaging Income is expected to generate 0.64 times more return on investment than Ag Growth. However, Richards Packaging Income is 1.57 times less risky than Ag Growth. It trades about 0.0 of its potential returns per unit of risk. Ag Growth International is currently generating about -0.02 per unit of risk. If you would invest  2,995  in Richards Packaging Income on September 3, 2024 and sell it today you would lose (14.00) from holding Richards Packaging Income or give up 0.47% of portfolio value over 90 days.

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

Richards Packaging Income  vs.  Ag Growth International

Richards Packaging Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Richards Packaging Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Richards Packaging is not utilizing all of its potentials. The recent stock price disturbance, 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 Richards Packaging and Ag Growth

The main advantage of trading using opposite Richards Packaging and Ag Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Richards Packaging 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 Richards Packaging Income 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.