Correlation Between Agro Tech and Oriental Carbon

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

Diversification Opportunities for Agro Tech and Oriental Carbon

0.52

Correlation Coefficient

Agro Tech  Oriental Carbon

Very weak diversification

The 3 months correlation between Agro and Oriental is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Agro Tech Foods and Oriental Carbon Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Carbon Chemicals 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 Oriental Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Carbon Chemicals has no effect on the direction of Agro Tech i.e., Agro Tech and Oriental Carbon go up and down completely randomly.

Pair Corralation between Agro Tech and Oriental Carbon

Assuming the 90 days trading horizon Agro Tech Foods is expected to generate 0.53 times more return on investment than Oriental Carbon. However, Agro Tech Foods is 1.88 times less risky than Oriental Carbon. It trades about 0.02 of its potential returns per unit of risk. Oriental Carbon Chemicals is currently generating about -0.05 per unit of risk. If you would invest  84,665  in Agro Tech Foods on October 24, 2024 and sell it today you would earn a total of  3,040  from holding Agro Tech Foods or generate 3.59% return on investment over 90 days.

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

Agro Tech Foods  vs.  Oriental Carbon Chemicals

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.

Oriental Carbon Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oriental Carbon Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Agro Tech and Oriental Carbon

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

The idea behind Agro Tech Foods and Oriental Carbon Chemicals 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.