Correlation Between Selan Exploration and Agarwal Industrial

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

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

Diversification Opportunities for Selan Exploration and Agarwal Industrial

0.06

Correlation Coefficient

Selan Exploration  Agarwal Industrial

Significant diversification

The 3 months correlation between Selan and Agarwal is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Selan Exploration Technology and Agarwal Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agarwal Industrial and Selan Exploration 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 Selan Exploration Technology 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 Selan Exploration i.e., Selan Exploration and Agarwal Industrial go up and down completely randomly.

Pair Corralation between Selan Exploration and Agarwal Industrial

Assuming the 90 days trading horizon Selan Exploration Technology is expected to under-perform the Agarwal Industrial. In addition to that, Selan Exploration is 1.14 times more volatile than Agarwal Industrial. It trades about -0.24 of its total potential returns per unit of risk. Agarwal Industrial is currently generating about -0.26 per unit of volatility. If you would invest  129,515  in Agarwal Industrial on October 27, 2024 and sell it today you would lose (17,840) from holding Agarwal Industrial or give up 13.77% of portfolio value over 90 days.

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

Selan Exploration Technology  vs.  Agarwal Industrial

Selan Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Selan Exploration Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Agarwal Industrial

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agarwal Industrial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Agarwal Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Selan Exploration and Agarwal Industrial

The main advantage of trading using opposite Selan Exploration and Agarwal Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Selan Exploration 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 Selan Exploration Technology 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.