Correlation Between Rajnandini Metal and Agarwal Industrial

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

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

Diversification Opportunities for Rajnandini Metal and Agarwal Industrial

0.78

Correlation Coefficient

Rajnandini Metal  Agarwal Industrial

Poor diversification

The 3 months correlation between Rajnandini and Agarwal is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Rajnandini Metal Limited and Agarwal Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agarwal Industrial and Rajnandini Metal 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 Rajnandini Metal Limited 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 Rajnandini Metal i.e., Rajnandini Metal and Agarwal Industrial go up and down completely randomly.

Pair Corralation between Rajnandini Metal and Agarwal Industrial

Assuming the 90 days trading horizon Rajnandini Metal Limited is expected to under-perform the Agarwal Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Rajnandini Metal Limited is 1.25 times less risky than Agarwal Industrial. The stock trades about -0.44 of its potential returns per unit of risk. The Agarwal Industrial is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  125,985  in Agarwal Industrial on December 28, 2024 and sell it today you would lose (26,080) from holding Agarwal Industrial or give up 20.7% of portfolio value over 90 days.

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

Rajnandini Metal Limited  vs.  Agarwal Industrial

Rajnandini Metal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rajnandini Metal Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Agarwal Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agarwal Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Rajnandini Metal and Agarwal Industrial

The main advantage of trading using opposite Rajnandini Metal and Agarwal Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rajnandini Metal 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 Rajnandini Metal Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.