Correlation Between Agro Tech and KEI Industries

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

Diversification Opportunities for Agro Tech and KEI Industries

0.07

Correlation Coefficient

Agro Tech  KEI Industries

Significant diversification

The 3 months correlation between Agro and KEI is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Agro Tech Foods and KEI Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEI Industries 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 KEI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEI Industries has no effect on the direction of Agro Tech i.e., Agro Tech and KEI Industries go up and down completely randomly.

Pair Corralation between Agro Tech and KEI Industries

Assuming the 90 days trading horizon Agro Tech Foods is expected to generate 1.39 times more return on investment than KEI Industries. However, Agro Tech is 1.39 times more volatile than KEI Industries Limited. It trades about 0.0 of its potential returns per unit of risk. KEI Industries Limited is currently generating about -0.07 per unit of risk. If you would invest  94,950  in Agro Tech Foods on October 15, 2024 and sell it today you would lose (3,480) from holding Agro Tech Foods or give up 3.67% of portfolio value over 90 days.

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

Agro Tech Foods  vs.  KEI Industries 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

KEI Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEI Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Agro Tech and KEI Industries

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

The idea behind Agro Tech Foods and KEI Industries 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 Transaction History module to view history of all your transactions and understand their impact on performance.