Correlation Between Agro Tech and Patanjali Foods

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

Diversification Opportunities for Agro Tech and Patanjali Foods

-0.01

Correlation Coefficient

Agro Tech  Patanjali Foods

Good diversification

The 3 months correlation between Agro and Patanjali is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Agro Tech Foods and Patanjali Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patanjali Foods 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 Patanjali Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patanjali Foods has no effect on the direction of Agro Tech i.e., Agro Tech and Patanjali Foods go up and down completely randomly.

Pair Corralation between Agro Tech and Patanjali Foods

Assuming the 90 days trading horizon Agro Tech Foods is expected to generate 1.63 times more return on investment than Patanjali Foods. However, Agro Tech is 1.63 times more volatile than Patanjali Foods Limited. It trades about 0.06 of its potential returns per unit of risk. Patanjali Foods Limited is currently generating about -0.06 per unit of risk. If you would invest  83,480  in Agro Tech Foods on August 31, 2024 and sell it today you would earn a total of  8,620  from holding Agro Tech Foods or generate 10.33% 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.  Patanjali Foods Limited

Agro Tech Foods

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Agro Tech Foods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Agro Tech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Patanjali Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Patanjali Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Agro Tech and Patanjali Foods

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

The idea behind Agro Tech Foods and Patanjali Foods 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.