Correlation Between AGC and Incitec Pivot

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

By analyzing existing cross correlation between AGC Inc ADR and Incitec Pivot Ltd, you can compare the effects of market volatilities on AGC and Incitec Pivot 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 AGC with a short position of Incitec Pivot. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGC and Incitec Pivot.

Diversification Opportunities for AGC and Incitec Pivot

-0.49

Correlation Coefficient

AGC  Incitec Pivot

Very good diversification

The 3 months correlation between AGC and Incitec is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding AGC Inc ADR and Incitec Pivot Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incitec Pivot and AGC 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 AGC Inc ADR are associated (or correlated) with Incitec Pivot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incitec Pivot has no effect on the direction of AGC i.e., AGC and Incitec Pivot go up and down completely randomly.

Pair Corralation between AGC and Incitec Pivot

Assuming the 90 days horizon AGC Inc ADR is expected to generate 0.63 times more return on investment than Incitec Pivot. However, AGC Inc ADR is 1.58 times less risky than Incitec Pivot. It trades about 0.06 of its potential returns per unit of risk. Incitec Pivot Ltd is currently generating about -0.01 per unit of risk. If you would invest  555.00  in AGC Inc ADR on December 20, 2024 and sell it today you would earn a total of  55.00  from holding AGC Inc ADR or generate 9.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

AGC Inc ADR  vs.  Incitec Pivot Ltd

AGC Inc ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AGC Inc ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, AGC showed solid returns over the last few months and may actually be approaching a breakup point.

Incitec Pivot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Incitec Pivot Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Incitec Pivot is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AGC and Incitec Pivot

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

The idea behind AGC Inc ADR and Incitec Pivot Ltd 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.