Correlation Between Hub Power and Dost Steels
Can any of the company-specific risk be diversified away by investing in both Hub Power and Dost 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 Hub Power and Dost Steels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hub Power and Dost Steels, you can compare the effects of market volatilities on Hub Power and Dost 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 Hub Power with a short position of Dost Steels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hub Power and Dost Steels.
Diversification Opportunities for Hub Power and Dost Steels
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hub and Dost is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Hub Power and Dost Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dost Steels and Hub Power 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 Hub Power are associated (or correlated) with Dost Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dost Steels has no effect on the direction of Hub Power i.e., Hub Power and Dost Steels go up and down completely randomly.
Pair Corralation between Hub Power and Dost Steels
Assuming the 90 days trading horizon Hub Power is expected to under-perform the Dost Steels. But the stock apears to be less risky and, when comparing its historical volatility, Hub Power is 1.05 times less risky than Dost Steels. The stock trades about -0.05 of its potential returns per unit of risk. The Dost Steels is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 646.00 in Dost Steels on August 28, 2024 and sell it today you would earn a total of 26.00 from holding Dost Steels or generate 4.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hub Power vs. Dost Steels
Performance |
| Timeline |
| Hub Power |
| Dost Steels |
Hub Power and Dost Steels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hub Power and Dost Steels
The main advantage of trading using opposite Hub Power and Dost Steels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hub Power position performs unexpectedly, Dost 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 Dost Steels will offset losses from the drop in Dost Steels' long position.| Hub Power vs. Pakistan State Oil | Hub Power vs. Oil and Gas | Hub Power vs. Lucky Cement | Hub Power vs. Engro |
| Dost Steels vs. Oil and Gas | Dost Steels vs. Pakistan State Oil | Dost Steels vs. Pakistan Petroleum | Dost Steels vs. Engro |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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