Correlation Between Agarwal Industrial and Chambal Fertilizers

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

By analyzing existing cross correlation between Agarwal Industrial and Chambal Fertilizers Chemicals, you can compare the effects of market volatilities on Agarwal Industrial and Chambal Fertilizers 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 Chambal Fertilizers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agarwal Industrial and Chambal Fertilizers.

Diversification Opportunities for Agarwal Industrial and Chambal Fertilizers

0.76

Correlation Coefficient

Agarwal Industrial  Chambal Fertilizers

Poor diversification

The 3 months correlation between Agarwal and Chambal is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Agarwal Industrial and Chambal Fertilizers Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chambal Fertilizers 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 Chambal Fertilizers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chambal Fertilizers has no effect on the direction of Agarwal Industrial i.e., Agarwal Industrial and Chambal Fertilizers go up and down completely randomly.

Pair Corralation between Agarwal Industrial and Chambal Fertilizers

Assuming the 90 days trading horizon Agarwal Industrial is expected to generate 1.18 times more return on investment than Chambal Fertilizers. However, Agarwal Industrial is 1.18 times more volatile than Chambal Fertilizers Chemicals. It trades about 0.12 of its potential returns per unit of risk. Chambal Fertilizers Chemicals is currently generating about 0.05 per unit of risk. If you would invest  107,420  in Agarwal Industrial on October 7, 2024 and sell it today you would earn a total of  19,415  from holding Agarwal Industrial or generate 18.07% return on investment over 90 days.

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

Agarwal Industrial  vs.  Chambal Fertilizers Chemicals

Agarwal Industrial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agarwal Industrial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Agarwal Industrial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Chambal Fertilizers

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chambal Fertilizers Chemicals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Chambal Fertilizers may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Agarwal Industrial and Chambal Fertilizers

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

The idea behind Agarwal Industrial and Chambal Fertilizers Chemicals 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.