Correlation Between Agarwal Industrial and HMT

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

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

Diversification Opportunities for Agarwal Industrial and HMT

0.41

Correlation Coefficient

Agarwal Industrial  HMT

Very weak diversification

The 3 months correlation between Agarwal and HMT is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Agarwal Industrial and HMT Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMT Limited 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 HMT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMT Limited has no effect on the direction of Agarwal Industrial i.e., Agarwal Industrial and HMT go up and down completely randomly.

Pair Corralation between Agarwal Industrial and HMT

Assuming the 90 days trading horizon Agarwal Industrial is expected to generate 0.99 times more return on investment than HMT. However, Agarwal Industrial is 1.01 times less risky than HMT. It trades about 0.11 of its potential returns per unit of risk. HMT Limited is currently generating about -0.13 per unit of risk. If you would invest  112,970  in Agarwal Industrial on September 13, 2024 and sell it today you would earn a total of  12,075  from holding Agarwal Industrial or generate 10.69% return on investment over 90 days.

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

Agarwal Industrial  vs.  HMT Limited

Agarwal Industrial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Agarwal Industrial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Agarwal Industrial is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

HMT Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Agarwal Industrial and HMT

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

The idea behind Agarwal Industrial and HMT 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.