Correlation Between Bosch and Agro Tech

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

Diversification Opportunities for Bosch and Agro Tech

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Bosch and Agro is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Bosch Limited 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 Bosch 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 Bosch Limited 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 Bosch i.e., Bosch and Agro Tech go up and down completely randomly.

Pair Corralation between Bosch and Agro Tech

Assuming the 90 days trading horizon Bosch Limited is expected to generate 0.56 times more return on investment than Agro Tech. However, Bosch Limited is 1.8 times less risky than Agro Tech. It trades about 0.1 of its potential returns per unit of risk. Agro Tech Foods is currently generating about 0.01 per unit of risk. If you would invest  1,677,587  in Bosch Limited on October 25, 2024 and sell it today you would earn a total of  1,420,653  from holding Bosch Limited or generate 84.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.8%
ValuesDaily Returns

Bosch Limited  vs.  Agro Tech Foods

 Performance 
       Timeline  
Bosch Limited 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Bosch Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private 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 comparatively stable basic indicators, Agro Tech is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Bosch and Agro Tech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bosch and Agro Tech

The main advantage of trading using opposite Bosch and Agro Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bosch 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 Bosch Limited 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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