Correlation Between Metropolitan Steel and KOT Addu
Can any of the company-specific risk be diversified away by investing in both Metropolitan Steel and KOT Addu 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 Metropolitan Steel and KOT Addu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metropolitan Steel Corp and KOT Addu Power, you can compare the effects of market volatilities on Metropolitan Steel and KOT Addu 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 Metropolitan Steel with a short position of KOT Addu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan Steel and KOT Addu.
Diversification Opportunities for Metropolitan Steel and KOT Addu
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Metropolitan and KOT is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan Steel Corp and KOT Addu Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KOT Addu Power and Metropolitan Steel 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 Metropolitan Steel Corp are associated (or correlated) with KOT Addu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KOT Addu Power has no effect on the direction of Metropolitan Steel i.e., Metropolitan Steel and KOT Addu go up and down completely randomly.
Pair Corralation between Metropolitan Steel and KOT Addu
Assuming the 90 days trading horizon Metropolitan Steel Corp is expected to under-perform the KOT Addu. In addition to that, Metropolitan Steel is 2.05 times more volatile than KOT Addu Power. It trades about -0.01 of its total potential returns per unit of risk. KOT Addu Power is currently generating about 0.12 per unit of volatility. If you would invest 2,779 in KOT Addu Power on August 31, 2024 and sell it today you would earn a total of 855.00 from holding KOT Addu Power or generate 30.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.37% |
| Values | Daily Returns |
Metropolitan Steel Corp vs. KOT Addu Power
Performance |
| Timeline |
| Metropolitan Steel Corp |
| KOT Addu Power |
Metropolitan Steel and KOT Addu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan Steel and KOT Addu
The main advantage of trading using opposite Metropolitan Steel and KOT Addu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan Steel position performs unexpectedly, KOT Addu 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 KOT Addu will offset losses from the drop in KOT Addu's long position.| Metropolitan Steel vs. Masood Textile Mills | Metropolitan Steel vs. Fauji Foods | Metropolitan Steel vs. KSB Pumps | Metropolitan Steel vs. Mari Petroleum |
| KOT Addu vs. Pakistan Tobacco | KOT Addu vs. Unilever Pakistan Foods | KOT Addu vs. Atlas Insurance | KOT Addu vs. East West 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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