Correlation Between Agro Phos and Spencers Retail

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

Diversification Opportunities for Agro Phos and Spencers Retail

0.64

Correlation Coefficient

Agro Phos  Spencers Retail

Poor diversification

The 3 months correlation between Agro and Spencers is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Agro Phos India and Spencers Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spencers Retail 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 Spencers Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spencers Retail has no effect on the direction of Agro Phos i.e., Agro Phos and Spencers Retail go up and down completely randomly.

Pair Corralation between Agro Phos and Spencers Retail

Assuming the 90 days trading horizon Agro Phos India is expected to under-perform the Spencers Retail. But the stock apears to be less risky and, when comparing its historical volatility, Agro Phos India is 1.56 times less risky than Spencers Retail. The stock trades about -0.13 of its potential returns per unit of risk. The Spencers Retail Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  8,996  in Spencers Retail Limited on October 24, 2024 and sell it today you would lose (722.00) from holding Spencers Retail Limited or give up 8.03% 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.  Spencers Retail 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.

Spencers Retail

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Agro Phos and Spencers Retail

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

The idea behind Agro Phos India and Spencers Retail 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.