Correlation Between Data Agro and Allied Bank

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

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

Diversification Opportunities for Data Agro and Allied Bank

-0.37

Correlation Coefficient

Data Agro  Allied Bank

Very good diversification

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

Pair Corralation between Data Agro and Allied Bank

Assuming the 90 days trading horizon Data Agro is expected to under-perform the Allied Bank. In addition to that, Data Agro is 1.95 times more volatile than Allied Bank. It trades about -0.13 of its total potential returns per unit of risk. Allied Bank is currently generating about 0.05 per unit of volatility. If you would invest  12,909  in Allied Bank on December 22, 2024 and sell it today you would earn a total of  581.00  from holding Allied Bank or generate 4.5% return on investment over 90 days.

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

Data Agro  vs.  Allied Bank

Data Agro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Data Agro has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Allied Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Allied Bank is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Data Agro and Allied Bank

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

The idea behind Data Agro and Allied Bank 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..