Correlation Between Crescent Steel and Towellers
Can any of the company-specific risk be diversified away by investing in both Crescent Steel and Towellers 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 Crescent Steel and Towellers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crescent Steel Allied and Towellers, you can compare the effects of market volatilities on Crescent Steel and Towellers 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 Crescent Steel with a short position of Towellers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crescent Steel and Towellers.
Diversification Opportunities for Crescent Steel and Towellers
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Crescent and Towellers is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Crescent Steel Allied and Towellers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Towellers and Crescent 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 Crescent Steel Allied are associated (or correlated) with Towellers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Towellers has no effect on the direction of Crescent Steel i.e., Crescent Steel and Towellers go up and down completely randomly.
Pair Corralation between Crescent Steel and Towellers
Assuming the 90 days trading horizon Crescent Steel is expected to generate 4.92 times less return on investment than Towellers. In addition to that, Crescent Steel is 1.37 times more volatile than Towellers. It trades about 0.02 of its total potential returns per unit of risk. Towellers is currently generating about 0.12 per unit of volatility. If you would invest 13,300 in Towellers on August 31, 2024 and sell it today you would earn a total of 953.00 from holding Towellers or generate 7.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Crescent Steel Allied vs. Towellers
Performance |
| Timeline |
| Crescent Steel Allied |
| Towellers |
Crescent Steel and Towellers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crescent Steel and Towellers
The main advantage of trading using opposite Crescent Steel and Towellers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crescent Steel position performs unexpectedly, Towellers 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 Towellers will offset losses from the drop in Towellers' long position.| Crescent Steel vs. Masood Textile Mills | Crescent Steel vs. Fauji Foods | Crescent Steel vs. KSB Pumps | Crescent Steel vs. Mari Petroleum |
| Towellers vs. Sitara Chemical Industries | Towellers vs. Big Bird Foods | Towellers vs. Pakistan Synthetics | Towellers vs. Pakistan Aluminium Beverage |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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