Correlation Between Agro Phos and Maharashtra Scooters

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

Diversification Opportunities for Agro Phos and Maharashtra Scooters

0.66

Correlation Coefficient

Agro Phos  Maharashtra Scooters

Poor diversification

The 3 months correlation between Agro and Maharashtra is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Agro Phos India and Maharashtra Scooters Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maharashtra Scooters 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 Maharashtra Scooters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maharashtra Scooters has no effect on the direction of Agro Phos i.e., Agro Phos and Maharashtra Scooters go up and down completely randomly.

Pair Corralation between Agro Phos and Maharashtra Scooters

Assuming the 90 days trading horizon Agro Phos India is expected to under-perform the Maharashtra Scooters. But the stock apears to be less risky and, when comparing its historical volatility, Agro Phos India is 1.06 times less risky than Maharashtra Scooters. The stock trades about -0.13 of its potential returns per unit of risk. The Maharashtra Scooters Limited is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  1,108,645  in Maharashtra Scooters Limited on October 24, 2024 and sell it today you would lose (167,645) from holding Maharashtra Scooters Limited or give up 15.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Agro Phos India  vs.  Maharashtra Scooters 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 uncertain performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Maharashtra Scooters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maharashtra Scooters Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Agro Phos and Maharashtra Scooters

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

The idea behind Agro Phos India and Maharashtra Scooters 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.