Correlation Between Computer Age and Axita Cotton

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

Diversification Opportunities for Computer Age and Axita Cotton

-0.33

Correlation Coefficient

Computer Age  Axita Cotton

Very good diversification

The 3 months correlation between Computer and Axita is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Computer Age Management and Axita Cotton Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axita Cotton Limited 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 Axita Cotton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axita Cotton Limited has no effect on the direction of Computer Age i.e., Computer Age and Axita Cotton go up and down completely randomly.

Pair Corralation between Computer Age and Axita Cotton

Assuming the 90 days trading horizon Computer Age Management is expected to under-perform the Axita Cotton. In addition to that, Computer Age is 1.29 times more volatile than Axita Cotton Limited. It trades about -0.28 of its total potential returns per unit of risk. Axita Cotton Limited is currently generating about -0.06 per unit of volatility. If you would invest  1,131  in Axita Cotton Limited on October 24, 2024 and sell it today you would lose (30.00) from holding Axita Cotton Limited or give up 2.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Computer Age Management  vs.  Axita Cotton Limited

Computer Age Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Computer Age Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Computer Age is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Axita Cotton Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axita Cotton Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Computer Age and Axita Cotton

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

The idea behind Computer Age Management and Axita Cotton 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.