Correlation Between Data Agro and Synthetic Products

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

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

Diversification Opportunities for Data Agro and Synthetic Products

0.67

Correlation Coefficient

Data Agro  Synthetic Products

Poor diversification

The 3 months correlation between Data and Synthetic is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Data Agro and Synthetic Products Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synthetic Products 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 Synthetic Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synthetic Products has no effect on the direction of Data Agro i.e., Data Agro and Synthetic Products go up and down completely randomly.

Pair Corralation between Data Agro and Synthetic Products

Assuming the 90 days trading horizon Data Agro is expected to under-perform the Synthetic Products. In addition to that, Data Agro is 1.27 times more volatile than Synthetic Products Enterprises. It trades about -0.07 of its total potential returns per unit of risk. Synthetic Products Enterprises is currently generating about -0.01 per unit of volatility. If you would invest  4,373  in Synthetic Products Enterprises on December 31, 2024 and sell it today you would lose (166.00) from holding Synthetic Products Enterprises or give up 3.8% of portfolio value over 90 days.

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

Data Agro  vs.  Synthetic Products Enterprises

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Synthetic Products

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Data Agro and Synthetic Products

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

The idea behind Data Agro and Synthetic Products Enterprises 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.