Correlation Between Agritech and Beco Steel
Can any of the company-specific risk be diversified away by investing in both Agritech and Beco 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 Agritech and Beco Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Agritech and Beco Steel, you can compare the effects of market volatilities on Agritech and Beco 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 Agritech with a short position of Beco Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agritech and Beco Steel.
Diversification Opportunities for Agritech and Beco Steel
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Agritech and Beco is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Agritech and Beco Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beco Steel and Agritech 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 Agritech are associated (or correlated) with Beco Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beco Steel has no effect on the direction of Agritech i.e., Agritech and Beco Steel go up and down completely randomly.
Pair Corralation between Agritech and Beco Steel
Assuming the 90 days trading horizon Agritech is expected to generate 0.57 times more return on investment than Beco Steel. However, Agritech is 1.75 times less risky than Beco Steel. It trades about 0.21 of its potential returns per unit of risk. Beco Steel is currently generating about 0.06 per unit of risk. If you would invest 3,714 in Agritech on August 27, 2024 and sell it today you would earn a total of 286.00 from holding Agritech or generate 7.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Agritech vs. Beco Steel
Performance |
| Timeline |
| Agritech |
| Beco Steel |
Agritech and Beco Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Agritech and Beco Steel
The main advantage of trading using opposite Agritech and Beco Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agritech position performs unexpectedly, Beco 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 Beco Steel will offset losses from the drop in Beco Steel's long position.| Agritech vs. Masood Textile Mills | Agritech vs. Fauji Foods | Agritech vs. KSB Pumps | Agritech vs. Mari Petroleum |
| Beco Steel vs. Habib Insurance | Beco Steel vs. Century Insurance | Beco Steel vs. Reliance Weaving Mills | Beco Steel vs. Media Times |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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