Correlation Between Agrometal SAI and Capex SA

Can any of the company-specific risk be diversified away by investing in both Agrometal SAI and Capex SA 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 Agrometal SAI and Capex SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Agrometal SAI and Capex SA, you can compare the effects of market volatilities on Agrometal SAI and Capex SA 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 Agrometal SAI with a short position of Capex SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agrometal SAI and Capex SA.

Diversification Opportunities for Agrometal SAI and Capex SA

0.92

Correlation Coefficient

Agrometal SAI  Capex SA

Almost no diversification

The 3 months correlation between Agrometal and Capex is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Agrometal SAI and Capex SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capex SA and Agrometal SAI 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 Agrometal SAI are associated (or correlated) with Capex SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capex SA has no effect on the direction of Agrometal SAI i.e., Agrometal SAI and Capex SA go up and down completely randomly.

Pair Corralation between Agrometal SAI and Capex SA

Assuming the 90 days trading horizon Agrometal SAI is expected to under-perform the Capex SA. In addition to that, Agrometal SAI is 1.02 times more volatile than Capex SA. It trades about -0.04 of its total potential returns per unit of risk. Capex SA is currently generating about 0.05 per unit of volatility. If you would invest  880,000  in Capex SA on October 1, 2024 and sell it today you would earn a total of  22,000  from holding Capex SA or generate 2.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Agrometal SAI  vs.  Capex SA

Agrometal SAI

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Agrometal SAI are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Agrometal SAI sustained solid returns over the last few months and may actually be approaching a breakup point.

Capex SA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capex SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Capex SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agrometal SAI and Capex SA

The main advantage of trading using opposite Agrometal SAI and Capex SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agrometal SAI position performs unexpectedly, Capex SA 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 Capex SA will offset losses from the drop in Capex SA's long position.

The idea behind Agrometal SAI and Capex SA 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.