Correlation Between Agro Tech and Deepak Nitrite

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

Diversification Opportunities for Agro Tech and Deepak Nitrite

0.27

Correlation Coefficient

Agro Tech  Deepak Nitrite

Modest diversification

The 3 months correlation between Agro and Deepak is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Agro Tech Foods and Deepak Nitrite Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deepak Nitrite 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 Deepak Nitrite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deepak Nitrite has no effect on the direction of Agro Tech i.e., Agro Tech and Deepak Nitrite go up and down completely randomly.

Pair Corralation between Agro Tech and Deepak Nitrite

Assuming the 90 days trading horizon Agro Tech Foods is expected to generate 1.49 times more return on investment than Deepak Nitrite. However, Agro Tech is 1.49 times more volatile than Deepak Nitrite Limited. It trades about -0.03 of its potential returns per unit of risk. Deepak Nitrite Limited is currently generating about -0.12 per unit of risk. If you would invest  94,965  in Agro Tech Foods on October 24, 2024 and sell it today you would lose (7,870) from holding Agro Tech Foods or give up 8.29% of portfolio value over 90 days.

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

Agro Tech Foods  vs.  Deepak Nitrite 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Deepak Nitrite

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deepak Nitrite Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Agro Tech and Deepak Nitrite

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

The idea behind Agro Tech Foods and Deepak Nitrite 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 Global Correlations module to find global opportunities by holding instruments from different markets.