Correlation Between Beco Steel and International Steels
Can any of the company-specific risk be diversified away by investing in both Beco Steel and International Steels 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 Beco Steel and International Steels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beco Steel and International Steels, you can compare the effects of market volatilities on Beco Steel and International Steels 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 Beco Steel with a short position of International Steels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beco Steel and International Steels.
Diversification Opportunities for Beco Steel and International Steels
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Beco and International is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Beco Steel and International Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Steels and Beco Steel 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 Beco Steel are associated (or correlated) with International Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Steels has no effect on the direction of Beco Steel i.e., Beco Steel and International Steels go up and down completely randomly.
Pair Corralation between Beco Steel and International Steels
Assuming the 90 days trading horizon Beco Steel is expected to generate 1.69 times more return on investment than International Steels. However, Beco Steel is 1.69 times more volatile than International Steels. It trades about 0.26 of its potential returns per unit of risk. International Steels is currently generating about 0.21 per unit of risk. If you would invest 620.00 in Beco Steel on September 12, 2024 and sell it today you would earn a total of 222.00 from holding Beco Steel or generate 35.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Beco Steel vs. International Steels
Performance |
| Timeline |
| Beco Steel |
| International Steels |
Beco Steel and International Steels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beco Steel and International Steels
The main advantage of trading using opposite Beco Steel and International Steels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beco Steel position performs unexpectedly, International Steels 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 International Steels will offset losses from the drop in International Steels' long position.| Beco Steel vs. WorldCall Telecom | Beco Steel vs. Ghandhara Automobile | Beco Steel vs. Data Agro | Beco Steel vs. ITTEFAQ Iron Industries |
| International Steels vs. Masood Textile Mills | International Steels vs. Fauji Foods | International Steels vs. KSB Pumps | International Steels vs. Mari Petroleum |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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