Correlation Between Agritech and JS Investments

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

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

Diversification Opportunities for Agritech and JS Investments

0.07

Correlation Coefficient

Agritech  JS Investments

Significant diversification

The 3 months correlation between Agritech and JSIL is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Agritech and JS Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JS Investments and Agritech 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 Agritech are associated (or correlated) with JS Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JS Investments has no effect on the direction of Agritech i.e., Agritech and JS Investments go up and down completely randomly.

Pair Corralation between Agritech and JS Investments

Assuming the 90 days trading horizon Agritech is expected to generate 0.57 times more return on investment than JS Investments. However, Agritech is 1.76 times less risky than JS Investments. It trades about 0.11 of its potential returns per unit of risk. JS Investments is currently generating about 0.01 per unit of risk. If you would invest  3,783  in Agritech on October 25, 2024 and sell it today you would earn a total of  571.00  from holding Agritech or generate 15.09% return on investment over 90 days.

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

Agritech  vs.  JS Investments

Agritech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agritech are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Agritech reported solid returns over the last few months and may actually be approaching a breakup point.

JS Investments

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Agritech and JS Investments

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

The idea behind Agritech and JS Investments 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.