Correlation Between Sapphire Foods and Arrow Greentech

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

By analyzing existing cross correlation between Sapphire Foods India and Arrow Greentech Limited, you can compare the effects of market volatilities on Sapphire Foods and Arrow Greentech 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 Sapphire Foods with a short position of Arrow Greentech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sapphire Foods and Arrow Greentech.

Diversification Opportunities for Sapphire Foods and Arrow Greentech

-0.51

Correlation Coefficient

Sapphire Foods  Arrow Greentech

Excellent diversification

The 3 months correlation between Sapphire and Arrow is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sapphire Foods India and Arrow Greentech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Greentech and Sapphire Foods 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 Sapphire Foods India are associated (or correlated) with Arrow Greentech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Greentech has no effect on the direction of Sapphire Foods i.e., Sapphire Foods and Arrow Greentech go up and down completely randomly.

Pair Corralation between Sapphire Foods and Arrow Greentech

Assuming the 90 days trading horizon Sapphire Foods is expected to generate 6.2 times less return on investment than Arrow Greentech. But when comparing it to its historical volatility, Sapphire Foods India is 1.7 times less risky than Arrow Greentech. It trades about 0.01 of its potential returns per unit of risk. Arrow Greentech Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  75,245  in Arrow Greentech Limited on October 6, 2024 and sell it today you would earn a total of  4,745  from holding Arrow Greentech Limited or generate 6.31% return on investment over 90 days.

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

Sapphire Foods India  vs.  Arrow Greentech Limited

Sapphire Foods India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapphire Foods India has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Sapphire Foods is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Arrow Greentech

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Greentech Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical and fundamental indicators, Arrow Greentech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sapphire Foods and Arrow Greentech

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

The idea behind Sapphire Foods India and Arrow Greentech Limited 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.