Correlation Between Fertilizers and Sandhar Technologies

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

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

Diversification Opportunities for Fertilizers and Sandhar Technologies

0.62

Correlation Coefficient

Fertilizers  Sandhar Technologies

Poor diversification

The 3 months correlation between Fertilizers and Sandhar is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Fertilizers and Chemicals and Sandhar Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandhar Technologies and Fertilizers 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 Fertilizers and Chemicals are associated (or correlated) with Sandhar Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandhar Technologies has no effect on the direction of Fertilizers i.e., Fertilizers and Sandhar Technologies go up and down completely randomly.

Pair Corralation between Fertilizers and Sandhar Technologies

Assuming the 90 days trading horizon Fertilizers and Chemicals is expected to generate 1.17 times more return on investment than Sandhar Technologies. However, Fertilizers is 1.17 times more volatile than Sandhar Technologies Limited. It trades about 0.07 of its potential returns per unit of risk. Sandhar Technologies Limited is currently generating about -0.04 per unit of risk. If you would invest  87,545  in Fertilizers and Chemicals on October 8, 2024 and sell it today you would earn a total of  9,790  from holding Fertilizers and Chemicals or generate 11.18% return on investment over 90 days.

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

Fertilizers and Chemicals  vs.  Sandhar Technologies Limited

Fertilizers and Chemicals

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fertilizers and Chemicals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Fertilizers unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sandhar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandhar Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sandhar Technologies is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Fertilizers and Sandhar Technologies

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

The idea behind Fertilizers and Chemicals and Sandhar Technologies Limited 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..