Correlation Between Aarti Drugs and Agro Tech

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

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

Diversification Opportunities for Aarti Drugs and Agro Tech

0.72

Correlation Coefficient

Aarti Drugs  Agro Tech

Poor diversification

The 3 months correlation between Aarti and Agro is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Aarti Drugs Limited 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 Aarti Drugs 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 Aarti Drugs Limited 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 Aarti Drugs i.e., Aarti Drugs and Agro Tech go up and down completely randomly.

Pair Corralation between Aarti Drugs and Agro Tech

Assuming the 90 days trading horizon Aarti Drugs Limited is expected to under-perform the Agro Tech. In addition to that, Aarti Drugs is 1.33 times more volatile than Agro Tech Foods. It trades about -0.17 of its total potential returns per unit of risk. Agro Tech Foods is currently generating about -0.09 per unit of volatility. If you would invest  89,945  in Agro Tech Foods on December 24, 2024 and sell it today you would lose (9,510) from holding Agro Tech Foods or give up 10.57% of portfolio value over 90 days.

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

Aarti Drugs Limited  vs.  Agro Tech Foods

Aarti Drugs Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aarti Drugs Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Agro Tech Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agro Tech Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Aarti Drugs and Agro Tech

The main advantage of trading using opposite Aarti Drugs and Agro Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aarti Drugs 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 Aarti Drugs Limited 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.