Correlation Between KOT Addu and AGP

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

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

Diversification Opportunities for KOT Addu and AGP

0.92

Correlation Coefficient

KOT Addu  AGP

Almost no diversification

The 3 months correlation between KOT and AGP is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding KOT Addu Power and AGP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGP and KOT Addu 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 KOT Addu Power are associated (or correlated) with AGP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGP has no effect on the direction of KOT Addu i.e., KOT Addu and AGP go up and down completely randomly.

Pair Corralation between KOT Addu and AGP

Assuming the 90 days trading horizon KOT Addu Power is expected to generate 0.83 times more return on investment than AGP. However, KOT Addu Power is 1.2 times less risky than AGP. It trades about 0.32 of its potential returns per unit of risk. AGP is currently generating about 0.21 per unit of risk. If you would invest  3,285  in KOT Addu Power on September 27, 2024 and sell it today you would earn a total of  505.00  from holding KOT Addu Power or generate 15.37% return on investment over 90 days.

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

KOT Addu Power  vs.  AGP

KOT Addu Power

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KOT Addu Power are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, KOT Addu disclosed solid returns over the last few months and may actually be approaching a breakup point.

AGP

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AGP are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, AGP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KOT Addu and AGP

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

The idea behind KOT Addu Power and AGP 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.