Correlation Between International Steels and Hub Power
Can any of the company-specific risk be diversified away by investing in both International Steels and Hub Power 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 Hub Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Steels and Hub Power, you can compare the effects of market volatilities on International Steels and Hub Power 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 Hub Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Steels and Hub Power.
Diversification Opportunities for International Steels and Hub Power
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between International and Hub is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding International Steels and Hub Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hub Power 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 Hub Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hub Power has no effect on the direction of International Steels i.e., International Steels and Hub Power go up and down completely randomly.
Pair Corralation between International Steels and Hub Power
Assuming the 90 days trading horizon International Steels is expected to under-perform the Hub Power. But the stock apears to be less risky and, when comparing its historical volatility, International Steels is 1.03 times less risky than Hub Power. The stock trades about -0.5 of its potential returns per unit of risk. The Hub Power is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 13,109 in Hub Power on November 4, 2024 and sell it today you would lose (71.00) from holding Hub Power or give up 0.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Steels vs. Hub Power
Performance |
| Timeline |
| International Steels |
| Hub Power |
International Steels and Hub Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Steels and Hub Power
The main advantage of trading using opposite International Steels and Hub Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Steels position performs unexpectedly, Hub Power 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 Hub Power will offset losses from the drop in Hub Power's long position.| International Steels vs. Allied Bank | International Steels vs. MCB Bank | International Steels vs. Dost Steels | International Steels vs. Crescent Star Insurance |
| Hub Power vs. Jubilee Life Insurance | Hub Power vs. East West Insurance | Hub Power vs. Shaheen Insurance | Hub Power vs. Premier Insurance |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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