Correlation Between Agarwal Industrial and Azad Engineering

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

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

Diversification Opportunities for Agarwal Industrial and Azad Engineering

0.67

Correlation Coefficient

Agarwal Industrial  Azad Engineering

Poor diversification

The 3 months correlation between Agarwal and Azad is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Agarwal Industrial and Azad Engineering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azad Engineering and Agarwal Industrial 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 Agarwal Industrial are associated (or correlated) with Azad Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azad Engineering has no effect on the direction of Agarwal Industrial i.e., Agarwal Industrial and Azad Engineering go up and down completely randomly.

Pair Corralation between Agarwal Industrial and Azad Engineering

Assuming the 90 days trading horizon Agarwal Industrial is expected to under-perform the Azad Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Agarwal Industrial is 1.41 times less risky than Azad Engineering. The stock trades about -0.21 of its potential returns per unit of risk. The Azad Engineering Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  169,930  in Azad Engineering Limited on October 24, 2024 and sell it today you would lose (1,305) from holding Azad Engineering Limited or give up 0.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Agarwal Industrial  vs.  Azad Engineering Limited

Agarwal Industrial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Agarwal Industrial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Agarwal Industrial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Azad Engineering

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Azad Engineering Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Azad Engineering unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agarwal Industrial and Azad Engineering

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

The idea behind Agarwal Industrial and Azad Engineering 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.