Correlation Between TATA SUMER and Agarwal Industrial

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

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

Diversification Opportunities for TATA SUMER and Agarwal Industrial

0.25

Correlation Coefficient

TATA SUMER  Agarwal Industrial

Modest diversification

The 3 months correlation between TATA and Agarwal is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding TATA SUMER PRODUCTS and Agarwal Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agarwal Industrial and TATA SUMER 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 TATA SUMER PRODUCTS 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 TATA SUMER i.e., TATA SUMER and Agarwal Industrial go up and down completely randomly.

Pair Corralation between TATA SUMER and Agarwal Industrial

Assuming the 90 days trading horizon TATA SUMER PRODUCTS is expected to under-perform the Agarwal Industrial. But the stock apears to be less risky and, when comparing its historical volatility, TATA SUMER PRODUCTS is 1.41 times less risky than Agarwal Industrial. The stock trades about -0.25 of its potential returns per unit of risk. The Agarwal Industrial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  118,275  in Agarwal Industrial on September 15, 2024 and sell it today you would earn a total of  7,775  from holding Agarwal Industrial or generate 6.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

TATA SUMER PRODUCTS  vs.  Agarwal Industrial

TATA SUMER PRODUCTS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TATA SUMER PRODUCTS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Agarwal Industrial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Agarwal Industrial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Agarwal Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with TATA SUMER and Agarwal Industrial

The main advantage of trading using opposite TATA SUMER and Agarwal Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TATA SUMER 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 TATA SUMER PRODUCTS 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.