Correlation Between Synthetic Products and AGP

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

By analyzing existing cross correlation between Synthetic Products Enterprises and AGP, you can compare the effects of market volatilities on Synthetic Products and AGP 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 Synthetic Products with a short position of AGP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synthetic Products and AGP.

Diversification Opportunities for Synthetic Products and AGP

0.23

Correlation Coefficient

Synthetic Products  AGP

Modest diversification

The 3 months correlation between Synthetic and AGP is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Synthetic Products Enterprises and AGP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGP and Synthetic Products 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 Synthetic Products Enterprises are associated (or correlated) with AGP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGP has no effect on the direction of Synthetic Products i.e., Synthetic Products and AGP go up and down completely randomly.

Pair Corralation between Synthetic Products and AGP

Assuming the 90 days trading horizon Synthetic Products Enterprises is expected to under-perform the AGP. In addition to that, Synthetic Products is 1.42 times more volatile than AGP. It trades about -0.01 of its total potential returns per unit of risk. AGP is currently generating about 0.28 per unit of volatility. If you would invest  10,466  in AGP on September 13, 2024 and sell it today you would earn a total of  6,516  from holding AGP or generate 62.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Synthetic Products Enterprises  vs.  AGP

Synthetic Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Synthetic Products Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Synthetic Products is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

AGP

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AGP are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, AGP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Synthetic Products and AGP

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

The idea behind Synthetic Products Enterprises and AGP 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.