Correlation Between Big Bird and Agritech
Can any of the company-specific risk be diversified away by investing in both Big Bird and Agritech 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 Big Bird and Agritech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big Bird Foods and Agritech, you can compare the effects of market volatilities on Big Bird and Agritech 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 Big Bird with a short position of Agritech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Bird and Agritech.
Diversification Opportunities for Big Bird and Agritech
Excellent diversification
The 3 months correlation between Big and Agritech is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Big Bird Foods and Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agritech and Big Bird 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 Big Bird Foods are associated (or correlated) with Agritech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agritech has no effect on the direction of Big Bird i.e., Big Bird and Agritech go up and down completely randomly.
Pair Corralation between Big Bird and Agritech
Assuming the 90 days trading horizon Big Bird is expected to generate 1.71 times less return on investment than Agritech. But when comparing it to its historical volatility, Big Bird Foods is 1.03 times less risky than Agritech. It trades about 0.08 of its potential returns per unit of risk. Agritech is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,263 in Agritech on August 24, 2024 and sell it today you would earn a total of 2,737 from holding Agritech or generate 216.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 32.23% |
| Values | Daily Returns |
Big Bird Foods vs. Agritech
Performance |
| Timeline |
| Big Bird Foods |
| Agritech |
Big Bird and Agritech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big Bird and Agritech
The main advantage of trading using opposite Big Bird and Agritech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Bird position performs unexpectedly, Agritech 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 Agritech will offset losses from the drop in Agritech's long position.| Big Bird vs. Habib Insurance | Big Bird vs. Ghandhara Automobile | Big Bird vs. Century Insurance | Big Bird vs. Reliance Weaving Mills |
| Agritech vs. Matco Foods | Agritech vs. Unilever Pakistan Foods | Agritech vs. Big Bird Foods | Agritech vs. Habib Insurance |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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