Correlation Between Computer Age and Agro Tech

Can any of the company-specific risk be diversified away by investing in both Computer Age and Agro Tech 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 Computer Age and Agro Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Computer Age Management and Agro Tech Foods, you can compare the effects of market volatilities on Computer Age and Agro Tech 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 Computer Age with a short position of Agro Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Computer Age and Agro Tech.

Diversification Opportunities for Computer Age and Agro Tech

0.37

Correlation Coefficient

Computer Age  Agro Tech

Weak diversification

The 3 months correlation between Computer and Agro is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Computer Age Management and Agro Tech Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agro Tech Foods and Computer Age 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 Computer Age Management are associated (or correlated) with Agro Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agro Tech Foods has no effect on the direction of Computer Age i.e., Computer Age and Agro Tech go up and down completely randomly.

Pair Corralation between Computer Age and Agro Tech

Assuming the 90 days trading horizon Computer Age Management is expected to generate 0.82 times more return on investment than Agro Tech. However, Computer Age Management is 1.21 times less risky than Agro Tech. It trades about 0.09 of its potential returns per unit of risk. Agro Tech Foods is currently generating about 0.02 per unit of risk. If you would invest  219,443  in Computer Age Management on October 4, 2024 and sell it today you would earn a total of  288,097  from holding Computer Age Management or generate 131.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Computer Age Management  vs.  Agro Tech Foods

Computer Age Management

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Computer Age Management are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Computer Age unveiled solid returns over the last few months and may actually be approaching a breakup point.

Agro Tech Foods

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Computer Age and Agro Tech

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

The idea behind Computer Age Management and Agro Tech Foods 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.