Correlation Between Delta Manufacturing and Agro Phos

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

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

Diversification Opportunities for Delta Manufacturing and Agro Phos

-0.26

Correlation Coefficient

Delta Manufacturing  Agro Phos

Very good diversification

The 3 months correlation between Delta and Agro is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Delta Manufacturing Limited and Agro Phos India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agro Phos India and Delta Manufacturing 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 Delta Manufacturing Limited are associated (or correlated) with Agro Phos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agro Phos India has no effect on the direction of Delta Manufacturing i.e., Delta Manufacturing and Agro Phos go up and down completely randomly.

Pair Corralation between Delta Manufacturing and Agro Phos

Assuming the 90 days trading horizon Delta Manufacturing Limited is expected to generate 1.02 times more return on investment than Agro Phos. However, Delta Manufacturing is 1.02 times more volatile than Agro Phos India. It trades about 0.03 of its potential returns per unit of risk. Agro Phos India is currently generating about 0.01 per unit of risk. If you would invest  7,665  in Delta Manufacturing Limited on October 9, 2024 and sell it today you would earn a total of  2,691  from holding Delta Manufacturing Limited or generate 35.11% return on investment over 90 days.

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

Delta Manufacturing Limited  vs.  Agro Phos India

Delta Manufacturing

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Manufacturing Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Delta Manufacturing may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Agro Phos India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agro Phos India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Delta Manufacturing and Agro Phos

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

The idea behind Delta Manufacturing Limited and Agro Phos India 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.