Correlation Between AGCO and Austin Engineering

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

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

Diversification Opportunities for AGCO and Austin Engineering

-0.13

Correlation Coefficient

AGCO  Austin Engineering

Good diversification

The 3 months correlation between AGCO and Austin is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding AGCO Corp. and Austin Engineering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austin Engineering and AGCO 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 AGCO Corporation are associated (or correlated) with Austin Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austin Engineering has no effect on the direction of AGCO i.e., AGCO and Austin Engineering go up and down completely randomly.

Pair Corralation between AGCO and Austin Engineering

Given the investment horizon of 90 days AGCO is expected to generate 50.4 times less return on investment than Austin Engineering. But when comparing it to its historical volatility, AGCO Corporation is 3.54 times less risky than Austin Engineering. It trades about 0.0 of its potential returns per unit of risk. Austin Engineering Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Austin Engineering Limited on September 22, 2024 and sell it today you would earn a total of  0.00  from holding Austin Engineering Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

AGCO Corp.  vs.  Austin Engineering Limited

AGCO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AGCO Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, AGCO is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Austin Engineering

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Austin Engineering Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Austin Engineering reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AGCO and Austin Engineering

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

The idea behind AGCO Corporation and Austin 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.