Correlation Between Laxmi Organic and Agro Tech

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

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

Diversification Opportunities for Laxmi Organic and Agro Tech

0.01

Correlation Coefficient

Laxmi Organic  Agro Tech

Significant diversification

The 3 months correlation between Laxmi and Agro is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Laxmi Organic Industries and Agro Tech Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agro Tech Foods and Laxmi Organic 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 Laxmi Organic Industries are associated (or correlated) with Agro Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agro Tech Foods has no effect on the direction of Laxmi Organic i.e., Laxmi Organic and Agro Tech go up and down completely randomly.

Pair Corralation between Laxmi Organic and Agro Tech

Assuming the 90 days trading horizon Laxmi Organic Industries is expected to under-perform the Agro Tech. But the stock apears to be less risky and, when comparing its historical volatility, Laxmi Organic Industries is 1.2 times less risky than Agro Tech. The stock trades about -0.01 of its potential returns per unit of risk. The Agro Tech Foods is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  82,590  in Agro Tech Foods on October 4, 2024 and sell it today you would earn a total of  9,815  from holding Agro Tech Foods or generate 11.88% return on investment over 90 days.

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

Laxmi Organic Industries  vs.  Agro Tech Foods

Laxmi Organic Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Laxmi Organic Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Agro Tech Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Agro Tech Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Agro Tech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Laxmi Organic and Agro Tech

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

The idea behind Laxmi Organic Industries and Agro Tech Foods 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.