Correlation Between Associated Alcohols and Dhanuka Agritech

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

Diversification Opportunities for Associated Alcohols and Dhanuka Agritech

0.33

Correlation Coefficient

Associated Alcohols  Dhanuka Agritech

Weak diversification

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

Pair Corralation between Associated Alcohols and Dhanuka Agritech

Assuming the 90 days trading horizon Associated Alcohols Breweries is expected to generate 1.42 times more return on investment than Dhanuka Agritech. However, Associated Alcohols is 1.42 times more volatile than Dhanuka Agritech Limited. It trades about 0.19 of its potential returns per unit of risk. Dhanuka Agritech Limited is currently generating about -0.15 per unit of risk. If you would invest  93,140  in Associated Alcohols Breweries on October 6, 2024 and sell it today you would earn a total of  18,465  from holding Associated Alcohols Breweries or generate 19.82% return on investment over 90 days.

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

Associated Alcohols Breweries  vs.  Dhanuka Agritech Limited

Associated Alcohols

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Alcohols Breweries are ranked lower than 12 (%) 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.

Dhanuka Agritech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dhanuka Agritech Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dhanuka Agritech is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Associated Alcohols and Dhanuka Agritech

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

The idea behind Associated Alcohols Breweries and Dhanuka Agritech 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.