Correlation Between Housing Development and International Agricultural

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

By analyzing existing cross correlation between Housing Development Bank and International Agricultural Products, you can compare the effects of market volatilities on Housing Development and International Agricultural 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 Housing Development with a short position of International Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Housing Development and International Agricultural.

Diversification Opportunities for Housing Development and International Agricultural

-0.64

Correlation Coefficient

Housing Development  International Agricultural

Excellent diversification

The 3 months correlation between Housing and International is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Housing Development Bank and International Agricultural Pro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Agricultural and Housing Development 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 Housing Development Bank are associated (or correlated) with International Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Agricultural has no effect on the direction of Housing Development i.e., Housing Development and International Agricultural go up and down completely randomly.

Pair Corralation between Housing Development and International Agricultural

Assuming the 90 days trading horizon Housing Development is expected to generate 1.04 times less return on investment than International Agricultural. But when comparing it to its historical volatility, Housing Development Bank is 9.67 times less risky than International Agricultural. It trades about 0.07 of its potential returns per unit of risk. International Agricultural Products is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,851  in International Agricultural Products on December 26, 2024 and sell it today you would lose (483.00) from holding International Agricultural Products or give up 26.09% of portfolio value over 90 days.

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

Housing Development Bank  vs.  International Agricultural Pro

Housing Development Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Housing Development Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Housing Development is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

International Agricultural

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Agricultural Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, International Agricultural is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Housing Development and International Agricultural

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

The idea behind Housing Development Bank and International Agricultural Products 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.