Correlation Between Sitara Chemical and Agritech

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

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

Diversification Opportunities for Sitara Chemical and Agritech

0.15

Correlation Coefficient

Sitara Chemical  Agritech

Average diversification

The 3 months correlation between Sitara and Agritech is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Sitara Chemical Industries and Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agritech and Sitara Chemical 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 Sitara Chemical Industries are associated (or correlated) with Agritech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agritech has no effect on the direction of Sitara Chemical i.e., Sitara Chemical and Agritech go up and down completely randomly.

Pair Corralation between Sitara Chemical and Agritech

Assuming the 90 days trading horizon Sitara Chemical is expected to generate 2.57 times less return on investment than Agritech. In addition to that, Sitara Chemical is 1.03 times more volatile than Agritech. It trades about 0.08 of its total potential returns per unit of risk. Agritech is currently generating about 0.21 per unit of volatility. If you would invest  3,714  in Agritech on October 26, 2024 and sell it today you would earn a total of  1,512  from holding Agritech or generate 40.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Sitara Chemical Industries  vs.  Agritech

Sitara Chemical Indu

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sitara Chemical Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sitara Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Agritech

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Agritech are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Agritech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sitara Chemical and Agritech

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

The idea behind Sitara Chemical Industries and Agritech 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.