Correlation Between Cambridge Technology and Dhanuka Agritech

Can any of the company-specific risk be diversified away by investing in both Cambridge Technology and Dhanuka Agritech 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 Cambridge Technology and Dhanuka Agritech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cambridge Technology Enterprises and Dhanuka Agritech Limited, you can compare the effects of market volatilities on Cambridge Technology and Dhanuka Agritech 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 Cambridge Technology with a short position of Dhanuka Agritech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cambridge Technology and Dhanuka Agritech.

Diversification Opportunities for Cambridge Technology and Dhanuka Agritech

0.36

Correlation Coefficient

Cambridge Technology  Dhanuka Agritech

Weak diversification

The 3 months correlation between Cambridge and Dhanuka is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Cambridge Technology Enterpris and Dhanuka Agritech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dhanuka Agritech and Cambridge Technology 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 Cambridge Technology Enterprises are associated (or correlated) with Dhanuka Agritech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dhanuka Agritech has no effect on the direction of Cambridge Technology i.e., Cambridge Technology and Dhanuka Agritech go up and down completely randomly.

Pair Corralation between Cambridge Technology and Dhanuka Agritech

Assuming the 90 days trading horizon Cambridge Technology Enterprises is expected to generate 2.15 times more return on investment than Dhanuka Agritech. However, Cambridge Technology is 2.15 times more volatile than Dhanuka Agritech Limited. It trades about 0.19 of its potential returns per unit of risk. Dhanuka Agritech Limited is currently generating about -0.02 per unit of risk. If you would invest  8,726  in Cambridge Technology Enterprises on September 27, 2024 and sell it today you would earn a total of  1,232  from holding Cambridge Technology Enterprises or generate 14.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Cambridge Technology Enterpris  vs.  Dhanuka Agritech Limited

Cambridge Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambridge Technology Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Cambridge Technology is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Dhanuka Agritech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dhanuka Agritech Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dhanuka Agritech is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cambridge Technology and Dhanuka Agritech

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

The idea behind Cambridge Technology Enterprises and Dhanuka Agritech 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.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.