Correlation Between Archean Chemical and Sandhar Technologies

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

By analyzing existing cross correlation between Archean Chemical Industries and Sandhar Technologies Limited, you can compare the effects of market volatilities on Archean Chemical and Sandhar Technologies 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 Archean Chemical with a short position of Sandhar Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Archean Chemical and Sandhar Technologies.

Diversification Opportunities for Archean Chemical and Sandhar Technologies

0.55

Correlation Coefficient

Archean Chemical  Sandhar Technologies

Very weak diversification

The 3 months correlation between Archean and Sandhar is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Archean Chemical Industries and Sandhar Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandhar Technologies and Archean Chemical 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 Archean Chemical Industries are associated (or correlated) with Sandhar Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandhar Technologies has no effect on the direction of Archean Chemical i.e., Archean Chemical and Sandhar Technologies go up and down completely randomly.

Pair Corralation between Archean Chemical and Sandhar Technologies

Assuming the 90 days trading horizon Archean Chemical is expected to generate 3.18 times less return on investment than Sandhar Technologies. But when comparing it to its historical volatility, Archean Chemical Industries is 1.07 times less risky than Sandhar Technologies. It trades about 0.03 of its potential returns per unit of risk. Sandhar Technologies Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  23,758  in Sandhar Technologies Limited on September 28, 2024 and sell it today you would earn a total of  27,627  from holding Sandhar Technologies Limited or generate 116.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.39%
Values	Daily Returns

Archean Chemical Industries  vs.  Sandhar Technologies Limited

Archean Chemical Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Archean Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Sandhar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandhar Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sandhar Technologies is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Archean Chemical and Sandhar Technologies

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

The idea behind Archean Chemical Industries and Sandhar Technologies Limited 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.