Correlation Between Agro Tech and Ashapura Minechem

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

Diversification Opportunities for Agro Tech and Ashapura Minechem

-0.24

Correlation Coefficient

Agro Tech  Ashapura Minechem

Very good diversification

The 3 months correlation between Agro and Ashapura is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Agro Tech Foods and Ashapura Minechem Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashapura Minechem 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 Ashapura Minechem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashapura Minechem has no effect on the direction of Agro Tech i.e., Agro Tech and Ashapura Minechem go up and down completely randomly.

Pair Corralation between Agro Tech and Ashapura Minechem

Assuming the 90 days trading horizon Agro Tech Foods is expected to under-perform the Ashapura Minechem. But the stock apears to be less risky and, when comparing its historical volatility, Agro Tech Foods is 1.79 times less risky than Ashapura Minechem. The stock trades about -0.03 of its potential returns per unit of risk. The Ashapura Minechem Limited is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  24,320  in Ashapura Minechem Limited on October 26, 2024 and sell it today you would earn a total of  30,060  from holding Ashapura Minechem Limited or generate 123.6% return on investment over 90 days.

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

Agro Tech Foods  vs.  Ashapura Minechem Limited

Agro Tech Foods

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Agro Tech is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Ashapura Minechem

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ashapura Minechem Limited are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain primary indicators, Ashapura Minechem reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agro Tech and Ashapura Minechem

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

The idea behind Agro Tech Foods and Ashapura Minechem 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.