Correlation Between Agro Tech and Aarti Drugs

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

By analyzing existing cross correlation between Agro Tech Foods and Aarti Drugs Limited, you can compare the effects of market volatilities on Agro Tech and Aarti Drugs 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 Tech with a short position of Aarti Drugs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agro Tech and Aarti Drugs.

Diversification Opportunities for Agro Tech and Aarti Drugs

0.72

Correlation Coefficient

Agro Tech  Aarti Drugs

Poor diversification

The 3 months correlation between Agro and Aarti is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Agro Tech Foods and Aarti Drugs Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aarti Drugs Limited and Agro Tech 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 Tech Foods are associated (or correlated) with Aarti Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aarti Drugs Limited has no effect on the direction of Agro Tech i.e., Agro Tech and Aarti Drugs go up and down completely randomly.

Pair Corralation between Agro Tech and Aarti Drugs

Assuming the 90 days trading horizon Agro Tech Foods is expected to generate 0.34 times more return on investment than Aarti Drugs. However, Agro Tech Foods is 2.97 times less risky than Aarti Drugs. It trades about -0.01 of its potential returns per unit of risk. Aarti Drugs Limited is currently generating about -0.1 per unit of risk. If you would invest  80,720  in Agro Tech Foods on December 24, 2024 and sell it today you would lose (285.00) from holding Agro Tech Foods or give up 0.35% of portfolio value over 90 days.

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

Agro Tech Foods  vs.  Aarti Drugs Limited

Agro Tech Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agro Tech Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Aarti Drugs Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aarti Drugs Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Agro Tech and Aarti Drugs

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

The idea behind Agro Tech Foods and Aarti Drugs 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.