Correlation Between KSB Pumps and Metropolitan Steel
Can any of the company-specific risk be diversified away by investing in both KSB Pumps and Metropolitan 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 KSB Pumps and Metropolitan Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KSB Pumps and Metropolitan Steel Corp, you can compare the effects of market volatilities on KSB Pumps and Metropolitan 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 KSB Pumps with a short position of Metropolitan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of KSB Pumps and Metropolitan Steel.
Diversification Opportunities for KSB Pumps and Metropolitan Steel
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between KSB and Metropolitan is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding KSB Pumps and Metropolitan Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan Steel Corp and KSB Pumps 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 KSB Pumps are associated (or correlated) with Metropolitan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan Steel Corp has no effect on the direction of KSB Pumps i.e., KSB Pumps and Metropolitan Steel go up and down completely randomly.
Pair Corralation between KSB Pumps and Metropolitan Steel
Assuming the 90 days trading horizon KSB Pumps is expected to generate 0.76 times more return on investment than Metropolitan Steel. However, KSB Pumps is 1.32 times less risky than Metropolitan Steel. It trades about 0.03 of its potential returns per unit of risk. Metropolitan Steel Corp is currently generating about -0.05 per unit of risk. If you would invest 11,847 in KSB Pumps on August 31, 2024 and sell it today you would earn a total of 2,083 from holding KSB Pumps or generate 17.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 55.41% |
| Values | Daily Returns |
KSB Pumps vs. Metropolitan Steel Corp
Performance |
| Timeline |
| KSB Pumps |
| Metropolitan Steel Corp |
KSB Pumps and Metropolitan Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KSB Pumps and Metropolitan Steel
The main advantage of trading using opposite KSB Pumps and Metropolitan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KSB Pumps position performs unexpectedly, Metropolitan 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 Metropolitan Steel will offset losses from the drop in Metropolitan Steel's long position.| KSB Pumps vs. Masood Textile Mills | KSB Pumps vs. Fauji Foods | KSB Pumps vs. Mari Petroleum | KSB Pumps vs. Loads |
| Metropolitan Steel vs. Masood Textile Mills | Metropolitan Steel vs. Fauji Foods | Metropolitan Steel vs. KSB Pumps | Metropolitan Steel 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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