Correlation Between Unity Foods and Agha Steel

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

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

Diversification Opportunities for Unity Foods and Agha Steel

-0.42

Correlation Coefficient

Unity Foods  Agha Steel

Very good diversification

The 3 months correlation between Unity and Agha is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Unity Foods and Agha Steel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agha Steel Industries and Unity 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 Unity Foods are associated (or correlated) with Agha Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agha Steel Industries has no effect on the direction of Unity Foods i.e., Unity Foods and Agha Steel go up and down completely randomly.

Pair Corralation between Unity Foods and Agha Steel

Assuming the 90 days trading horizon Unity Foods is expected to under-perform the Agha Steel. But the stock apears to be less risky and, when comparing its historical volatility, Unity Foods is 1.28 times less risky than Agha Steel. The stock trades about -0.26 of its potential returns per unit of risk. The Agha Steel Industries is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,109  in Agha Steel Industries on October 9, 2024 and sell it today you would lose (30.00) from holding Agha Steel Industries or give up 2.71% of portfolio value over 90 days.

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

Unity Foods  vs.  Agha Steel Industries

Unity Foods

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Foods are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Unity Foods disclosed solid returns over the last few months and may actually be approaching a breakup point.

Agha Steel Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agha Steel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Agha Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Unity Foods and Agha Steel

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

The idea behind Unity Foods and Agha Steel Industries 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..