Correlation Between Associated Alcohols and Agro Phos

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

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

Diversification Opportunities for Associated Alcohols and Agro Phos

-0.32

Correlation Coefficient

Associated Alcohols  Agro Phos

Very good diversification

The 3 months correlation between Associated and Agro is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Associated Alcohols Breweries and Agro Phos India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agro Phos India and Associated Alcohols 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 Associated Alcohols Breweries are associated (or correlated) with Agro Phos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agro Phos India has no effect on the direction of Associated Alcohols i.e., Associated Alcohols and Agro Phos go up and down completely randomly.

Pair Corralation between Associated Alcohols and Agro Phos

Assuming the 90 days trading horizon Associated Alcohols Breweries is expected to generate 1.54 times more return on investment than Agro Phos. However, Associated Alcohols is 1.54 times more volatile than Agro Phos India. It trades about 0.18 of its potential returns per unit of risk. Agro Phos India is currently generating about -0.1 per unit of risk. If you would invest  82,995  in Associated Alcohols Breweries on October 25, 2024 and sell it today you would earn a total of  28,190  from holding Associated Alcohols Breweries or generate 33.97% return on investment over 90 days.

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

Associated Alcohols Breweries  vs.  Agro Phos India

Associated Alcohols

Risk-Adjusted Performance

14 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Alcohols Breweries are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental indicators, Associated Alcohols reported solid returns over the last few months and may actually be approaching a breakup point.

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 weak 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.

Pair Trading with Associated Alcohols and Agro Phos

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

The idea behind Associated Alcohols Breweries and Agro Phos 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.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.