Correlation Between Ajanta Pharma and Allied Blenders

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

Diversification Opportunities for Ajanta Pharma and Allied Blenders

0.17
  Correlation Coefficient

Average diversification

The 3 months correlation between Ajanta and Allied is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ajanta Pharma Limited and Allied Blenders Distillers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Blenders Dist and Ajanta Pharma 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 Ajanta Pharma Limited are associated (or correlated) with Allied Blenders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Blenders Dist has no effect on the direction of Ajanta Pharma i.e., Ajanta Pharma and Allied Blenders go up and down completely randomly.

Pair Corralation between Ajanta Pharma and Allied Blenders

Assuming the 90 days trading horizon Ajanta Pharma Limited is expected to under-perform the Allied Blenders. But the stock apears to be less risky and, when comparing its historical volatility, Ajanta Pharma Limited is 1.25 times less risky than Allied Blenders. The stock trades about -0.04 of its potential returns per unit of risk. The Allied Blenders Distillers is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  31,635  in Allied Blenders Distillers on September 13, 2024 and sell it today you would earn a total of  5,755  from holding Allied Blenders Distillers or generate 18.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

Ajanta Pharma Limited  vs.  Allied Blenders Distillers

 Performance 
       Timeline  
Ajanta Pharma Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ajanta Pharma Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.
Allied Blenders Dist 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Allied Blenders Distillers are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Allied Blenders may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ajanta Pharma and Allied Blenders Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ajanta Pharma and Allied Blenders

The main advantage of trading using opposite Ajanta Pharma and Allied Blenders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ajanta Pharma position performs unexpectedly, Allied Blenders 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 Allied Blenders will offset losses from the drop in Allied Blenders' long position.
The idea behind Ajanta Pharma Limited and Allied Blenders Distillers 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.

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