Correlation Between Dost Steels and East West
Can any of the company-specific risk be diversified away by investing in both Dost Steels and East West 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 Dost Steels and East West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dost Steels and East West Insurance, you can compare the effects of market volatilities on Dost Steels and East West 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 Dost Steels with a short position of East West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dost Steels and East West.
Diversification Opportunities for Dost Steels and East West
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dost and East is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Dost Steels and East West Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East West Insurance and Dost 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 Dost Steels are associated (or correlated) with East West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East West Insurance has no effect on the direction of Dost Steels i.e., Dost Steels and East West go up and down completely randomly.
Pair Corralation between Dost Steels and East West
Assuming the 90 days trading horizon Dost Steels is expected to under-perform the East West. But the stock apears to be less risky and, when comparing its historical volatility, Dost Steels is 2.27 times less risky than East West. The stock trades about -0.06 of its potential returns per unit of risk. The East West Insurance is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 3,771 in East West Insurance on September 12, 2024 and sell it today you would earn a total of 729.00 from holding East West Insurance or generate 19.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 82.61% |
| Values | Daily Returns |
Dost Steels vs. East West Insurance
Performance |
| Timeline |
| Dost Steels |
| East West Insurance |
Dost Steels and East West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dost Steels and East West
The main advantage of trading using opposite Dost Steels and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dost Steels position performs unexpectedly, East West 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 East West will offset losses from the drop in East West's long position.| Dost Steels vs. AKD Hospitality | Dost Steels vs. TPL Insurance | Dost Steels vs. Matco Foods | Dost Steels vs. Pakistan Tobacco |
| East West vs. Habib Insurance | East West vs. Ghandhara Automobile | East West vs. Century Insurance | East West vs. Reliance Weaving Mills |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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