Correlation Between Agarwal IndustrialLimite and Garware Hi-Tech

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

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

Diversification Opportunities for Agarwal IndustrialLimite and Garware Hi-Tech

0.76

Correlation Coefficient

Agarwal IndustrialLimite  Garware Hi-Tech

Poor diversification

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

Pair Corralation between Agarwal IndustrialLimite and Garware Hi-Tech

Assuming the 90 days trading horizon Agarwal Industrial is expected to under-perform the Garware Hi-Tech. But the stock apears to be less risky and, when comparing its historical volatility, Agarwal Industrial is 1.71 times less risky than Garware Hi-Tech. The stock trades about -0.17 of its potential returns per unit of risk. The Garware Hi Tech Films is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  514,050  in Garware Hi Tech Films on December 2, 2024 and sell it today you would lose (136,970) from holding Garware Hi Tech Films or give up 26.65% of portfolio value over 90 days.

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

Agarwal Industrial  vs.  Garware Hi Tech Films

Agarwal IndustrialLimite

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agarwal Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Garware Hi Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Garware Hi Tech Films has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Agarwal IndustrialLimite and Garware Hi-Tech

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

The idea behind Agarwal Industrial and Garware Hi Tech Films 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.