Correlation Between Agro Phos and Cantabil Retail

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

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

Diversification Opportunities for Agro Phos and Cantabil Retail

-0.25

Correlation Coefficient

Agro Phos  Cantabil Retail

Very good diversification

The 3 months correlation between Agro and Cantabil is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Agro Phos India and Cantabil Retail India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cantabil Retail India and Agro Phos 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 Agro Phos India are associated (or correlated) with Cantabil Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cantabil Retail India has no effect on the direction of Agro Phos i.e., Agro Phos and Cantabil Retail go up and down completely randomly.

Pair Corralation between Agro Phos and Cantabil Retail

Assuming the 90 days trading horizon Agro Phos India is expected to under-perform the Cantabil Retail. But the stock apears to be less risky and, when comparing its historical volatility, Agro Phos India is 1.69 times less risky than Cantabil Retail. The stock trades about -0.17 of its potential returns per unit of risk. The Cantabil Retail India is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  24,344  in Cantabil Retail India on October 9, 2024 and sell it today you would earn a total of  4,226  from holding Cantabil Retail India or generate 17.36% return on investment over 90 days.

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

Agro Phos India  vs.  Cantabil Retail India

Agro Phos India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agro Phos India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Cantabil Retail India

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cantabil Retail India are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Cantabil Retail demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agro Phos and Cantabil Retail

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

The idea behind Agro Phos India and Cantabil Retail India 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.