Correlation Between Bharat Road and Agarwal Industrial

Can any of the company-specific risk be diversified away by investing in both Bharat Road and Agarwal Industrial 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 Bharat Road and Agarwal Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bharat Road Network and Agarwal Industrial, you can compare the effects of market volatilities on Bharat Road and Agarwal Industrial 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 Bharat Road with a short position of Agarwal Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bharat Road and Agarwal Industrial.

Diversification Opportunities for Bharat Road and Agarwal Industrial

0.58

Correlation Coefficient

Bharat Road  Agarwal Industrial

Very weak diversification

The 3 months correlation between Bharat and Agarwal is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Bharat Road Network and Agarwal Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agarwal Industrial and Bharat Road 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 Bharat Road Network are associated (or correlated) with Agarwal Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agarwal Industrial has no effect on the direction of Bharat Road i.e., Bharat Road and Agarwal Industrial go up and down completely randomly.

Pair Corralation between Bharat Road and Agarwal Industrial

Assuming the 90 days trading horizon Bharat Road Network is expected to generate 2.11 times more return on investment than Agarwal Industrial. However, Bharat Road is 2.11 times more volatile than Agarwal Industrial. It trades about 0.02 of its potential returns per unit of risk. Agarwal Industrial is currently generating about -0.2 per unit of risk. If you would invest  4,695  in Bharat Road Network on October 22, 2024 and sell it today you would lose (23.00) from holding Bharat Road Network or give up 0.49% of portfolio value over 90 days.

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

Bharat Road Network  vs.  Agarwal Industrial

Bharat Road Network

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bharat Road Network are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Bharat Road may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Agarwal Industrial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Agarwal Industrial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating forward indicators, Agarwal Industrial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bharat Road and Agarwal Industrial

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

The idea behind Bharat Road Network and Agarwal Industrial 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.

Check out your portfolio center.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.