Correlation Between Dhanuka Agritech and S P

Can any of the company-specific risk be diversified away by investing in both Dhanuka Agritech and S P 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 S P 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 S P Apparels, you can compare the effects of market volatilities on Dhanuka Agritech and S P 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 S P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dhanuka Agritech and S P.

Diversification Opportunities for Dhanuka Agritech and S P

0.58

Correlation Coefficient

Dhanuka Agritech  S P

Very weak diversification

The 3 months correlation between Dhanuka and SPAL is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dhanuka Agritech Limited and S P Apparels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S P Apparels 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 S P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S P Apparels has no effect on the direction of Dhanuka Agritech i.e., Dhanuka Agritech and S P go up and down completely randomly.

Pair Corralation between Dhanuka Agritech and S P

Assuming the 90 days trading horizon Dhanuka Agritech is expected to generate 2.75 times less return on investment than S P. But when comparing it to its historical volatility, Dhanuka Agritech Limited is 1.94 times less risky than S P. It trades about 0.16 of its potential returns per unit of risk. S P Apparels is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  82,975  in S P Apparels on September 20, 2024 and sell it today you would earn a total of  10,450  from holding S P Apparels or generate 12.59% return on investment over 90 days.

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

Dhanuka Agritech Limited  vs.  S P Apparels

Dhanuka Agritech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dhanuka Agritech Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dhanuka Agritech is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

S P Apparels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days S P Apparels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, S P is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Dhanuka Agritech and S P

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

The idea behind Dhanuka Agritech Limited and S P Apparels 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.