Correlation Between Agro Phos and State Trading

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

Diversification Opportunities for Agro Phos and State Trading

0.33

Correlation Coefficient

Agro Phos  State Trading

Weak diversification

The 3 months correlation between Agro and State is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Agro Phos India and The State Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Trading 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 State Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Trading has no effect on the direction of Agro Phos i.e., Agro Phos and State Trading go up and down completely randomly.

Pair Corralation between Agro Phos and State Trading

Assuming the 90 days trading horizon Agro Phos India is expected to under-perform the State Trading. But the stock apears to be less risky and, when comparing its historical volatility, Agro Phos India is 1.85 times less risky than State Trading. The stock trades about -0.13 of its potential returns per unit of risk. The The State Trading is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14,913  in The State Trading on October 24, 2024 and sell it today you would lose (94.00) from holding The State Trading or give up 0.63% of portfolio value over 90 days.

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

Agro Phos India  vs.  The State Trading

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.

State Trading

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The State Trading are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, State Trading is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Agro Phos and State Trading

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

The idea behind Agro Phos India and The State Trading 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 Transaction History module to view history of all your transactions and understand their impact on performance.