Correlation Between Dost Steels and International Steels
Can any of the company-specific risk be diversified away by investing in both Dost Steels 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 Dost Steels and International Steels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dost Steels and International Steels, you can compare the effects of market volatilities on Dost Steels 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 Dost Steels with a short position of International Steels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dost Steels and International Steels.
Diversification Opportunities for Dost Steels and International Steels
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dost and International is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Dost Steels and International Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Steels 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 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 Dost Steels i.e., Dost Steels and International Steels go up and down completely randomly.
Pair Corralation between Dost Steels and International Steels
Assuming the 90 days trading horizon Dost Steels is expected to under-perform the International Steels. But the stock apears to be less risky and, when comparing its historical volatility, Dost Steels is 1.41 times less risky than International Steels. The stock trades about -0.06 of its potential returns per unit of risk. The International Steels is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 7,464 in International Steels on September 12, 2024 and sell it today you would earn a total of 1,189 from holding International Steels or generate 15.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dost Steels vs. International Steels
Performance |
| Timeline |
| Dost Steels |
| International Steels |
Dost Steels and International Steels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dost Steels and International Steels
The main advantage of trading using opposite Dost Steels and International Steels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dost Steels 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.| Dost Steels vs. AKD Hospitality | Dost Steels vs. TPL Insurance | Dost Steels vs. Matco Foods | Dost Steels vs. Pakistan Tobacco |
| 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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