Correlation Between Agro Tech and Praj Industries

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

Diversification Opportunities for Agro Tech and Praj Industries

-0.19
  Correlation Coefficient

Good diversification

The 3 months correlation between Agro and Praj is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Agro Tech Foods and Praj Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Praj Industries and Agro Tech 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 Agro Tech Foods are associated (or correlated) with Praj Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Praj Industries has no effect on the direction of Agro Tech i.e., Agro Tech and Praj Industries go up and down completely randomly.

Pair Corralation between Agro Tech and Praj Industries

Assuming the 90 days trading horizon Agro Tech is expected to generate 3.37 times less return on investment than Praj Industries. In addition to that, Agro Tech is 1.04 times more volatile than Praj Industries Limited. It trades about 0.02 of its total potential returns per unit of risk. Praj Industries Limited is currently generating about 0.08 per unit of volatility. If you would invest  36,327  in Praj Industries Limited on September 3, 2024 and sell it today you would earn a total of  46,048  from holding Praj Industries Limited or generate 126.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Agro Tech Foods  vs.  Praj Industries Limited

 Performance 
       Timeline  
Agro Tech Foods 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Agro Tech Foods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Agro Tech unveiled solid returns over the last few months and may actually be approaching a breakup point.
Praj Industries 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Praj Industries Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Praj Industries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Agro Tech and Praj Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Agro Tech and Praj Industries

The main advantage of trading using opposite Agro Tech and Praj Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agro Tech position performs unexpectedly, Praj Industries 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 Praj Industries will offset losses from the drop in Praj Industries' long position.
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The idea behind Agro Tech Foods and Praj Industries 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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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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