Correlation Between Data Agro and Agritech

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

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

Diversification Opportunities for Data Agro and Agritech

-0.29

Correlation Coefficient

Data Agro  Agritech

Very good diversification

The 3 months correlation between Data and Agritech is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Data Agro and Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agritech 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 Agritech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agritech has no effect on the direction of Data Agro i.e., Data Agro and Agritech go up and down completely randomly.

Pair Corralation between Data Agro and Agritech

Assuming the 90 days trading horizon Data Agro is expected to under-perform the Agritech. In addition to that, Data Agro is 1.62 times more volatile than Agritech. It trades about -0.01 of its total potential returns per unit of risk. Agritech is currently generating about 0.26 per unit of volatility. If you would invest  3,799  in Agritech on October 23, 2024 and sell it today you would earn a total of  517.00  from holding Agritech or generate 13.61% 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.  Agritech

Data Agro

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Data Agro are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Data Agro sustained solid returns over the last few months and may actually be approaching a breakup point.

Agritech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agritech are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Agritech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Data Agro and Agritech

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

The idea behind Data Agro and Agritech 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..