Correlation Between Dhanuka Agritech and Sapphire Foods

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

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

Diversification Opportunities for Dhanuka Agritech and Sapphire Foods

-0.15

Correlation Coefficient

Dhanuka Agritech  Sapphire Foods

Good diversification

The 3 months correlation between Dhanuka and Sapphire is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Dhanuka Agritech Limited and Sapphire Foods India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapphire Foods India and Dhanuka Agritech 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 Dhanuka Agritech Limited are associated (or correlated) with Sapphire Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapphire Foods India has no effect on the direction of Dhanuka Agritech i.e., Dhanuka Agritech and Sapphire Foods go up and down completely randomly.

Pair Corralation between Dhanuka Agritech and Sapphire Foods

Assuming the 90 days trading horizon Dhanuka Agritech is expected to generate 5.83 times less return on investment than Sapphire Foods. But when comparing it to its historical volatility, Dhanuka Agritech Limited is 9.35 times less risky than Sapphire Foods. It trades about 0.08 of its potential returns per unit of risk. Sapphire Foods India is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  28,943  in Sapphire Foods India on September 27, 2024 and sell it today you would earn a total of  3,532  from holding Sapphire Foods India or generate 12.2% return on investment over 90 days.

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

Dhanuka Agritech Limited  vs.  Sapphire Foods India

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.

Sapphire Foods India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapphire Foods India has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Dhanuka Agritech and Sapphire Foods

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

The idea behind Dhanuka Agritech Limited and Sapphire Foods 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.