Correlation Between Agritech and Shifa International

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

By analyzing existing cross correlation between Agritech and Shifa International Hospitals, you can compare the effects of market volatilities on Agritech and Shifa International 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 Shifa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agritech and Shifa International.

Diversification Opportunities for Agritech and Shifa International

0.32

Correlation Coefficient

Agritech  Shifa International

Weak diversification

The 3 months correlation between Agritech and Shifa is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Agritech and Shifa International Hospitals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shifa International 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 Shifa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shifa International has no effect on the direction of Agritech i.e., Agritech and Shifa International go up and down completely randomly.

Pair Corralation between Agritech and Shifa International

Assuming the 90 days trading horizon Agritech is expected to generate 2.01 times less return on investment than Shifa International. In addition to that, Agritech is 1.01 times more volatile than Shifa International Hospitals. It trades about 0.09 of its total potential returns per unit of risk. Shifa International Hospitals is currently generating about 0.18 per unit of volatility. If you would invest  13,337  in Shifa International Hospitals on October 12, 2024 and sell it today you would earn a total of  23,203  from holding Shifa International Hospitals or generate 173.97% return on investment over 90 days.

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

Agritech  vs.  Shifa International Hospitals

Agritech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agritech has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Agritech is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Shifa International

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shifa International Hospitals are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shifa International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agritech and Shifa International

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

The idea behind Agritech and Shifa International Hospitals 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.