Correlation Between International Steels and Murree Brewery
Can any of the company-specific risk be diversified away by investing in both International Steels and Murree Brewery 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 Murree Brewery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Steels and Murree Brewery, you can compare the effects of market volatilities on International Steels and Murree Brewery 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 Murree Brewery. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Steels and Murree Brewery.
Diversification Opportunities for International Steels and Murree Brewery
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Murree is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding International Steels and Murree Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murree Brewery 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 Murree Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murree Brewery has no effect on the direction of International Steels i.e., International Steels and Murree Brewery go up and down completely randomly.
Pair Corralation between International Steels and Murree Brewery
Assuming the 90 days trading horizon International Steels is expected to under-perform the Murree Brewery. In addition to that, International Steels is 1.05 times more volatile than Murree Brewery. It trades about -0.22 of its total potential returns per unit of risk. Murree Brewery is currently generating about 0.23 per unit of volatility. If you would invest 72,091 in Murree Brewery on October 31, 2024 and sell it today you would earn a total of 7,734 from holding Murree Brewery or generate 10.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Steels vs. Murree Brewery
Performance |
| Timeline |
| International Steels |
| Murree Brewery |
International Steels and Murree Brewery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Steels and Murree Brewery
The main advantage of trading using opposite International Steels and Murree Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Steels position performs unexpectedly, Murree Brewery 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 Murree Brewery will offset losses from the drop in Murree Brewery's long position.| International Steels vs. Pakistan Reinsurance | International Steels vs. Pakistan Telecommunication | International Steels vs. 786 Investment Limited | International Steels vs. JS Bank |
| Murree Brewery vs. Ghani Chemical Industries | Murree Brewery vs. JS Investments | Murree Brewery vs. MCB Bank | Murree Brewery vs. Ittehad Chemicals |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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