Correlation Between Amreli Steels and AKD Hospitality
Can any of the company-specific risk be diversified away by investing in both Amreli Steels and AKD Hospitality 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 Amreli Steels and AKD Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amreli Steels and AKD Hospitality, you can compare the effects of market volatilities on Amreli Steels and AKD Hospitality 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 Amreli Steels with a short position of AKD Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amreli Steels and AKD Hospitality.
Diversification Opportunities for Amreli Steels and AKD Hospitality
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amreli and AKD is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Amreli Steels and AKD Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKD Hospitality and Amreli Steels 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 Amreli Steels are associated (or correlated) with AKD Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKD Hospitality has no effect on the direction of Amreli Steels i.e., Amreli Steels and AKD Hospitality go up and down completely randomly.
Pair Corralation between Amreli Steels and AKD Hospitality
Assuming the 90 days trading horizon Amreli Steels is expected to generate 2.02 times less return on investment than AKD Hospitality. But when comparing it to its historical volatility, Amreli Steels is 1.32 times less risky than AKD Hospitality. It trades about 0.02 of its potential returns per unit of risk. AKD Hospitality is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 11,791 in AKD Hospitality on August 28, 2024 and sell it today you would earn a total of 2,209 from holding AKD Hospitality or generate 18.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 65.87% |
| Values | Daily Returns |
Amreli Steels vs. AKD Hospitality
Performance |
| Timeline |
| Amreli Steels |
| AKD Hospitality |
Amreli Steels and AKD Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amreli Steels and AKD Hospitality
The main advantage of trading using opposite Amreli Steels and AKD Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amreli Steels position performs unexpectedly, AKD Hospitality 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 AKD Hospitality will offset losses from the drop in AKD Hospitality's long position.| Amreli Steels vs. Oil and Gas | Amreli Steels vs. Pakistan State Oil | Amreli Steels vs. Pakistan Petroleum | Amreli Steels vs. Engro |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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