Correlation Between AU Small and Agro Tech

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

Diversification Opportunities for AU Small and Agro Tech

-0.25
  Correlation Coefficient

Very good diversification

The 3 months correlation between AUBANK and Agro is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding AU Small Finance and Agro Tech Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agro Tech Foods and AU Small 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 AU Small Finance are associated (or correlated) with Agro Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agro Tech Foods has no effect on the direction of AU Small i.e., AU Small and Agro Tech go up and down completely randomly.

Pair Corralation between AU Small and Agro Tech

Assuming the 90 days trading horizon AU Small Finance is expected to generate 1.04 times more return on investment than Agro Tech. However, AU Small is 1.04 times more volatile than Agro Tech Foods. It trades about 0.15 of its potential returns per unit of risk. Agro Tech Foods is currently generating about -0.25 per unit of risk. If you would invest  56,025  in AU Small Finance on November 7, 2024 and sell it today you would earn a total of  3,960  from holding AU Small Finance or generate 7.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

AU Small Finance  vs.  Agro Tech Foods

 Performance 
       Timeline  
AU Small Finance 

Risk-Adjusted Performance

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Strong
Very Weak
Over the last 90 days AU Small Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AU Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Agro Tech Foods 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Agro Tech Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

AU Small and Agro Tech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AU Small and Agro Tech

The main advantage of trading using opposite AU Small and Agro Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AU Small position performs unexpectedly, Agro Tech 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 Agro Tech will offset losses from the drop in Agro Tech's long position.
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The idea behind AU Small Finance and Agro Tech Foods 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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