Correlation Between Agro Phos and Fiberweb

Can any of the company-specific risk be diversified away by investing in both Agro Phos and Fiberweb 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 Fiberweb 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 Fiberweb Limited, you can compare the effects of market volatilities on Agro Phos and Fiberweb 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 Fiberweb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agro Phos and Fiberweb.

Diversification Opportunities for Agro Phos and Fiberweb

-0.53

Correlation Coefficient

Agro Phos  Fiberweb

Excellent diversification

The 3 months correlation between Agro and Fiberweb is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Agro Phos India and Fiberweb Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fiberweb Limited 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 Fiberweb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fiberweb Limited has no effect on the direction of Agro Phos i.e., Agro Phos and Fiberweb go up and down completely randomly.

Pair Corralation between Agro Phos and Fiberweb

Assuming the 90 days trading horizon Agro Phos is expected to generate 3.17 times less return on investment than Fiberweb. But when comparing it to its historical volatility, Agro Phos India is 1.06 times less risky than Fiberweb. It trades about 0.01 of its potential returns per unit of risk. Fiberweb Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,685  in Fiberweb Limited on October 9, 2024 and sell it today you would earn a total of  2,120  from holding Fiberweb Limited or generate 57.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.59%
Values	Daily Returns

Agro Phos India  vs.  Fiberweb Limited

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 uncertain 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.

Fiberweb Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fiberweb Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Fiberweb exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agro Phos and Fiberweb

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

The idea behind Agro Phos India and Fiberweb 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.