Correlation Between Sobha and Agro Tech
Can any of the company-specific risk be diversified away by investing in both Sobha 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 Sobha and Agro Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sobha Limited and Agro Tech Foods, you can compare the effects of market volatilities on Sobha 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 Sobha with a short position of Agro Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sobha and Agro Tech.
Diversification Opportunities for Sobha and Agro Tech
Significant diversification
The 3 months correlation between Sobha and Agro is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Sobha 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 Sobha 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 Sobha 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 Sobha i.e., Sobha and Agro Tech go up and down completely randomly.
Pair Corralation between Sobha and Agro Tech
Assuming the 90 days trading horizon Sobha Limited is expected to under-perform the Agro Tech. In addition to that, Sobha is 1.1 times more volatile than Agro Tech Foods. It trades about -0.35 of its total potential returns per unit of risk. Agro Tech Foods is currently generating about -0.16 per unit of volatility. If you would invest 98,330 in Agro Tech Foods on October 13, 2024 and sell it today you would lose (6,860) from holding Agro Tech Foods or give up 6.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sobha Limited vs. Agro Tech Foods
Performance |
| Timeline |
| Sobha Limited |
| Agro Tech Foods |
Sobha and Agro Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sobha and Agro Tech
The main advantage of trading using opposite Sobha and Agro Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sobha 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.| Sobha vs. ICICI Bank Limited | Sobha vs. Selan Exploration Technology | Sobha vs. Agro Tech Foods | Sobha vs. Jaypee Infratech Limited |
| Agro Tech vs. Som Distilleries Breweries | Agro Tech vs. Oriental Hotels Limited | Agro Tech vs. Samhi Hotels Limited | Agro Tech vs. Salzer Electronics Limited |
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 CEOs Directory module to screen CEOs from public companies around the world.
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