Correlation Between International Steels and Crescent Steel
Can any of the company-specific risk be diversified away by investing in both International Steels 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 International Steels and Crescent Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Steels and Crescent Steel Allied, you can compare the effects of market volatilities on International Steels 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 International Steels with a short position of Crescent Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Steels and Crescent Steel.
Diversification Opportunities for International Steels and Crescent Steel
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between International and Crescent is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding International Steels 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 International 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 International Steels 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 International Steels i.e., International Steels and Crescent Steel go up and down completely randomly.
Pair Corralation between International Steels and Crescent Steel
Assuming the 90 days trading horizon International Steels is expected to generate 3.75 times less return on investment than Crescent Steel. But when comparing it to its historical volatility, International Steels is 1.82 times less risky than Crescent Steel. It trades about 0.05 of its potential returns per unit of risk. Crescent Steel Allied is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,389 in Crescent Steel Allied on September 4, 2024 and sell it today you would earn a total of 5,639 from holding Crescent Steel Allied or generate 128.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Steels vs. Crescent Steel Allied
Performance |
| Timeline |
| International Steels |
| Crescent Steel Allied |
International Steels and Crescent Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Steels and Crescent Steel
The main advantage of trading using opposite International Steels and Crescent Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Steels 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.| International Steels vs. JS Investments | International Steels vs. Premier Insurance | International Steels vs. ITTEFAQ Iron Industries | International Steels vs. TPL Insurance |
| Crescent Steel vs. Pakistan Aluminium Beverage | Crescent Steel vs. ITTEFAQ Iron Industries | Crescent Steel vs. International Steels | Crescent Steel vs. Mughal Iron Steel |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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