Correlation Between Agarwal Industrial and Marshall Machines

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Can any of the company-specific risk be diversified away by investing in both Agarwal Industrial and Marshall Machines 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 Agarwal Industrial and Marshall Machines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Agarwal Industrial and Marshall Machines Limited, you can compare the effects of market volatilities on Agarwal Industrial and Marshall Machines 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 Agarwal Industrial with a short position of Marshall Machines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agarwal Industrial and Marshall Machines.

Diversification Opportunities for Agarwal Industrial and Marshall Machines

-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between Agarwal and Marshall is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Agarwal Industrial and Marshall Machines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marshall Machines and Agarwal Industrial 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 Agarwal Industrial are associated (or correlated) with Marshall Machines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marshall Machines has no effect on the direction of Agarwal Industrial i.e., Agarwal Industrial and Marshall Machines go up and down completely randomly.

Pair Corralation between Agarwal Industrial and Marshall Machines

Assuming the 90 days trading horizon Agarwal Industrial is expected to generate 0.8 times more return on investment than Marshall Machines. However, Agarwal Industrial is 1.25 times less risky than Marshall Machines. It trades about 0.04 of its potential returns per unit of risk. Marshall Machines Limited is currently generating about -0.07 per unit of risk. If you would invest  85,652  in Agarwal Industrial on November 6, 2024 and sell it today you would earn a total of  21,683  from holding Agarwal Industrial or generate 25.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.67%
ValuesDaily Returns

Agarwal Industrial  vs.  Marshall Machines Limited

 Performance 
       Timeline  
Agarwal Industrial 

Risk-Adjusted Performance

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Over the last 90 days Agarwal Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Agarwal Industrial is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.
Marshall Machines 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Marshall Machines Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Agarwal Industrial and Marshall Machines Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Agarwal Industrial and Marshall Machines

The main advantage of trading using opposite Agarwal Industrial and Marshall Machines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agarwal Industrial position performs unexpectedly, Marshall Machines 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 Marshall Machines will offset losses from the drop in Marshall Machines' long position.
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The idea behind Agarwal Industrial and Marshall Machines 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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