Correlation Between Mangalore Chemicals and Agarwal Industrial

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

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

Diversification Opportunities for Mangalore Chemicals and Agarwal Industrial

0.64

Correlation Coefficient

Mangalore Chemicals  Agarwal Industrial

Poor diversification

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

Pair Corralation between Mangalore Chemicals and Agarwal Industrial

Assuming the 90 days trading horizon Mangalore Chemicals Fertilizers is expected to under-perform the Agarwal Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Mangalore Chemicals Fertilizers is 1.25 times less risky than Agarwal Industrial. The stock trades about -0.15 of its potential returns per unit of risk. The Agarwal Industrial is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  118,930  in Agarwal Industrial on September 30, 2024 and sell it today you would earn a total of  10,400  from holding Agarwal Industrial or generate 8.74% return on investment over 90 days.

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

Mangalore Chemicals Fertilizer  vs.  Agarwal Industrial

Mangalore Chemicals

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mangalore Chemicals Fertilizers are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Mangalore Chemicals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Agarwal Industrial

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agarwal Industrial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent forward indicators, Agarwal Industrial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mangalore Chemicals and Agarwal Industrial

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

The idea behind Mangalore Chemicals Fertilizers and Agarwal Industrial 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.