Correlation Between Agarwal Industrial and Zomato

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

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

Diversification Opportunities for Agarwal Industrial and Zomato

0.69

Correlation Coefficient

Agarwal Industrial  Zomato

Poor diversification

The 3 months correlation between Agarwal and Zomato is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Agarwal Industrial and Zomato Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zomato 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 Zomato. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zomato Limited has no effect on the direction of Agarwal Industrial i.e., Agarwal Industrial and Zomato go up and down completely randomly.

Pair Corralation between Agarwal Industrial and Zomato

Assuming the 90 days trading horizon Agarwal Industrial is expected to generate 1.35 times more return on investment than Zomato. However, Agarwal Industrial is 1.35 times more volatile than Zomato Limited. It trades about 0.42 of its potential returns per unit of risk. Zomato Limited is currently generating about 0.02 per unit of risk. If you would invest  102,330  in Agarwal Industrial on September 26, 2024 and sell it today you would earn a total of  27,315  from holding Agarwal Industrial or generate 26.69% return on investment over 90 days.

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

Agarwal Industrial  vs.  Zomato Limited

Agarwal Industrial

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Agarwal Industrial are ranked lower than 7 (%) 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.

Zomato Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zomato Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zomato is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Agarwal Industrial and Zomato

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

The idea behind Agarwal Industrial and Zomato 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.