Correlation Between Packages and Agritech
Can any of the company-specific risk be diversified away by investing in both Packages 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 Packages and Agritech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Packages and Agritech, you can compare the effects of market volatilities on Packages 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 Packages with a short position of Agritech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Packages and Agritech.
Diversification Opportunities for Packages and Agritech
Average diversification
The 3 months correlation between Packages and Agritech is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Packages and Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agritech and Packages 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 Packages 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 Packages i.e., Packages and Agritech go up and down completely randomly.
Pair Corralation between Packages and Agritech
Assuming the 90 days trading horizon Packages is expected to generate 5.58 times less return on investment than Agritech. But when comparing it to its historical volatility, Packages is 1.89 times less risky than Agritech. It trades about 0.05 of its potential returns per unit of risk. Agritech is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,201 in Agritech on August 27, 2024 and sell it today you would earn a total of 2,799 from holding Agritech or generate 233.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Packages vs. Agritech
Performance |
| Timeline |
| Packages |
| Agritech |
Packages and Agritech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Packages and Agritech
The main advantage of trading using opposite Packages and Agritech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Packages 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.| Packages vs. Masood Textile Mills | Packages vs. Fauji Foods | Packages vs. KSB Pumps | Packages vs. Mari Petroleum |
| Agritech vs. Pakistan Aluminium Beverage | Agritech vs. Murree Brewery | Agritech vs. Jubilee Life Insurance | Agritech vs. Packages |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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