Correlation Between Hi Tech and Agritech

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

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

Diversification Opportunities for Hi Tech and Agritech

-0.66

Correlation Coefficient

Hi Tech  Agritech

Excellent diversification

The 3 months correlation between HTL and Agritech is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hi Tech Lubricants and Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agritech and Hi Tech 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 Hi Tech Lubricants are associated (or correlated) with Agritech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agritech has no effect on the direction of Hi Tech i.e., Hi Tech and Agritech go up and down completely randomly.

Pair Corralation between Hi Tech and Agritech

Assuming the 90 days trading horizon Hi Tech Lubricants is expected to under-perform the Agritech. But the stock apears to be less risky and, when comparing its historical volatility, Hi Tech Lubricants is 1.84 times less risky than Agritech. The stock trades about -0.08 of its potential returns per unit of risk. The Agritech is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,799  in Agritech on December 23, 2024 and sell it today you would earn a total of  3,560  from holding Agritech or generate 93.71% return on investment over 90 days.

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

Hi Tech Lubricants  vs.  Agritech

Hi Tech Lubricants

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hi Tech Lubricants 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 basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Agritech

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Agritech are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Agritech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hi Tech and Agritech

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

The idea behind Hi Tech Lubricants and Agritech 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..