Correlation Between Hi Tech and Crescent Steel
Can any of the company-specific risk be diversified away by investing in both Hi Tech and Crescent Steel 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 Hi Tech and Crescent Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hi Tech Lubricants and Crescent Steel Allied, you can compare the effects of market volatilities on Hi Tech and Crescent Steel 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 Hi Tech with a short position of Crescent Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hi Tech and Crescent Steel.
Diversification Opportunities for Hi Tech and Crescent Steel
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HTL and Crescent is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Hi Tech Lubricants and Crescent Steel Allied in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Steel Allied and Hi Tech 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 Hi Tech Lubricants are associated (or correlated) with Crescent Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Steel Allied has no effect on the direction of Hi Tech i.e., Hi Tech and Crescent Steel go up and down completely randomly.
Pair Corralation between Hi Tech and Crescent Steel
Assuming the 90 days trading horizon Hi Tech is expected to generate 1.76 times less return on investment than Crescent Steel. But when comparing it to its historical volatility, Hi Tech Lubricants is 1.63 times less risky than Crescent Steel. It trades about 0.13 of its potential returns per unit of risk. Crescent Steel Allied is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 7,206 in Crescent Steel Allied on September 2, 2024 and sell it today you would earn a total of 3,058 from holding Crescent Steel Allied or generate 42.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hi Tech Lubricants vs. Crescent Steel Allied
Performance |
| Timeline |
| Hi Tech Lubricants |
| Crescent Steel Allied |
Hi Tech and Crescent Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hi Tech and Crescent Steel
The main advantage of trading using opposite Hi Tech and Crescent Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hi Tech position performs unexpectedly, Crescent Steel 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 Crescent Steel will offset losses from the drop in Crescent Steel's long position.The idea behind Hi Tech Lubricants and Crescent Steel Allied pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Crescent Steel vs. Masood Textile Mills | Crescent Steel vs. Fauji Foods | Crescent Steel vs. KSB Pumps | Crescent Steel 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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