Correlation Between KOT Addu and Crescent Star
Can any of the company-specific risk be diversified away by investing in both KOT Addu and Crescent Star 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 KOT Addu and Crescent Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KOT Addu Power and Crescent Star Insurance, you can compare the effects of market volatilities on KOT Addu and Crescent Star 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 KOT Addu with a short position of Crescent Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of KOT Addu and Crescent Star.
Diversification Opportunities for KOT Addu and Crescent Star
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KOT and Crescent is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding KOT Addu Power and Crescent Star Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Star Insurance and KOT Addu 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 KOT Addu Power are associated (or correlated) with Crescent Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Star Insurance has no effect on the direction of KOT Addu i.e., KOT Addu and Crescent Star go up and down completely randomly.
Pair Corralation between KOT Addu and Crescent Star
Assuming the 90 days trading horizon KOT Addu Power is expected to generate 0.37 times more return on investment than Crescent Star. However, KOT Addu Power is 2.71 times less risky than Crescent Star. It trades about -0.2 of its potential returns per unit of risk. Crescent Star Insurance is currently generating about -0.33 per unit of risk. If you would invest 3,755 in KOT Addu Power on November 7, 2024 and sell it today you would lose (99.00) from holding KOT Addu Power or give up 2.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KOT Addu Power vs. Crescent Star Insurance
Performance |
| Timeline |
| KOT Addu Power |
| Crescent Star Insurance |
KOT Addu and Crescent Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KOT Addu and Crescent Star
The main advantage of trading using opposite KOT Addu and Crescent Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KOT Addu position performs unexpectedly, Crescent Star 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 Star will offset losses from the drop in Crescent Star's long position.| KOT Addu vs. Unity Foods | KOT Addu vs. Air Link Communication | KOT Addu vs. Shaheen Insurance | KOT Addu vs. Pakistan Aluminium Beverage |
| Crescent Star vs. Masood Textile Mills | Crescent Star vs. Fauji Foods | Crescent Star vs. KSB Pumps | Crescent Star 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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