Correlation Between Agro Tech and Cambridge Technology

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

Diversification Opportunities for Agro Tech and Cambridge Technology

-0.17

Correlation Coefficient

Agro Tech  Cambridge Technology

Good diversification

The 3 months correlation between Agro and Cambridge is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Agro Tech Foods and Cambridge Technology Enterpris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambridge Technology 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 Cambridge Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambridge Technology has no effect on the direction of Agro Tech i.e., Agro Tech and Cambridge Technology go up and down completely randomly.

Pair Corralation between Agro Tech and Cambridge Technology

Assuming the 90 days trading horizon Agro Tech Foods is expected to under-perform the Cambridge Technology. But the stock apears to be less risky and, when comparing its historical volatility, Agro Tech Foods is 1.7 times less risky than Cambridge Technology. The stock trades about -0.13 of its potential returns per unit of risk. The Cambridge Technology Enterprises is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  9,011  in Cambridge Technology Enterprises on September 30, 2024 and sell it today you would earn a total of  1,375  from holding Cambridge Technology Enterprises or generate 15.26% 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.  Cambridge Technology Enterpris

Agro Tech Foods

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Agro Tech Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Agro Tech is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Cambridge Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambridge Technology Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Cambridge Technology is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Agro Tech and Cambridge Technology

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

The idea behind Agro Tech Foods and Cambridge Technology Enterprises 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.