Correlation Between Agro Tech and Shaily Engineering

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

Diversification Opportunities for Agro Tech and Shaily Engineering

0.27

Correlation Coefficient

Agro Tech  Shaily Engineering

Modest diversification

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

Pair Corralation between Agro Tech and Shaily Engineering

Assuming the 90 days trading horizon Agro Tech is expected to generate 2.04 times less return on investment than Shaily Engineering. But when comparing it to its historical volatility, Agro Tech Foods is 1.12 times less risky than Shaily Engineering. It trades about 0.06 of its potential returns per unit of risk. Shaily Engineering Plastics is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  102,795  in Shaily Engineering Plastics on August 31, 2024 and sell it today you would earn a total of  26,505  from holding Shaily Engineering Plastics or generate 25.78% return on investment over 90 days.

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

Agro Tech Foods  vs.  Shaily Engineering Plastics

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.

Shaily Engineering

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shaily Engineering Plastics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady forward indicators, Shaily Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agro Tech and Shaily Engineering

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

The idea behind Agro Tech Foods and Shaily Engineering Plastics 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.