Correlation Between National Foods and Amreli Steels
Can any of the company-specific risk be diversified away by investing in both National Foods and Amreli Steels 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 National Foods and Amreli Steels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Foods and Amreli Steels, you can compare the effects of market volatilities on National Foods and Amreli Steels 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 National Foods with a short position of Amreli Steels. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Foods and Amreli Steels.
Diversification Opportunities for National Foods and Amreli Steels
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between National and Amreli is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding National Foods and Amreli Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amreli Steels and National Foods 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 National Foods are associated (or correlated) with Amreli Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amreli Steels has no effect on the direction of National Foods i.e., National Foods and Amreli Steels go up and down completely randomly.
Pair Corralation between National Foods and Amreli Steels
Assuming the 90 days trading horizon National Foods is expected to generate 2.29 times less return on investment than Amreli Steels. But when comparing it to its historical volatility, National Foods is 1.65 times less risky than Amreli Steels. It trades about 0.11 of its potential returns per unit of risk. Amreli Steels is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,956 in Amreli Steels on October 26, 2024 and sell it today you would earn a total of 537.00 from holding Amreli Steels or generate 27.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Foods vs. Amreli Steels
Performance |
| Timeline |
| National Foods |
| Amreli Steels |
National Foods and Amreli Steels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Foods and Amreli Steels
The main advantage of trading using opposite National Foods and Amreli Steels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Foods position performs unexpectedly, Amreli Steels 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 Amreli Steels will offset losses from the drop in Amreli Steels' long position.| National Foods vs. EFU General Insurance | National Foods vs. Reliance Insurance Co | National Foods vs. Century Insurance | National Foods vs. Matco Foods |
| Amreli Steels vs. Ghani Chemical Industries | Amreli Steels vs. Sitara Chemical Industries | Amreli Steels vs. Habib Insurance | Amreli Steels 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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