Correlation Between Tata Investment and Agro Tech

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

By analyzing existing cross correlation between Tata Investment and Agro Tech Foods, you can compare the effects of market volatilities on Tata Investment and Agro Tech 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 Investment with a short position of Agro Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Investment and Agro Tech.

Diversification Opportunities for Tata Investment and Agro Tech

-0.03

Correlation Coefficient

Tata Investment  Agro Tech

Good diversification

The 3 months correlation between Tata and Agro is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Tata Investment and Agro Tech Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agro Tech Foods and Tata Investment 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 Investment are associated (or correlated) with Agro Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agro Tech Foods has no effect on the direction of Tata Investment i.e., Tata Investment and Agro Tech go up and down completely randomly.

Pair Corralation between Tata Investment and Agro Tech

Assuming the 90 days trading horizon Tata Investment is expected to generate 0.41 times more return on investment than Agro Tech. However, Tata Investment is 2.45 times less risky than Agro Tech. It trades about 0.05 of its potential returns per unit of risk. Agro Tech Foods is currently generating about -0.05 per unit of risk. If you would invest  689,905  in Tata Investment on September 13, 2024 and sell it today you would earn a total of  8,650  from holding Tata Investment or generate 1.25% return on investment over 90 days.

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

Tata Investment  vs.  Agro Tech Foods

Tata Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Tata Investment is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Agro Tech Foods

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agro Tech Foods are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Agro Tech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tata Investment and Agro Tech

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

The idea behind Tata Investment and Agro Tech Foods 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.