Correlation Between Pakistan Aluminium and Crescent Steel
Can any of the company-specific risk be diversified away by investing in both Pakistan Aluminium and Crescent 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 Pakistan Aluminium and Crescent Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Aluminium Beverage and Crescent Steel Allied, you can compare the effects of market volatilities on Pakistan Aluminium and Crescent 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 Pakistan Aluminium with a short position of Crescent Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Aluminium and Crescent Steel.
Diversification Opportunities for Pakistan Aluminium and Crescent Steel
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pakistan and Crescent is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Aluminium Beverage and Crescent Steel Allied in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Steel Allied and Pakistan Aluminium 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 Pakistan Aluminium Beverage are associated (or correlated) with Crescent Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Steel Allied has no effect on the direction of Pakistan Aluminium i.e., Pakistan Aluminium and Crescent Steel go up and down completely randomly.
Pair Corralation between Pakistan Aluminium and Crescent Steel
Assuming the 90 days trading horizon Pakistan Aluminium is expected to generate 4.54 times less return on investment than Crescent Steel. But when comparing it to its historical volatility, Pakistan Aluminium Beverage is 1.83 times less risky than Crescent Steel. It trades about 0.04 of its potential returns per unit of risk. Crescent Steel Allied is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,389 in Crescent Steel Allied on September 4, 2024 and sell it today you would earn a total of 5,639 from holding Crescent Steel Allied or generate 128.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Aluminium Beverage vs. Crescent Steel Allied
Performance |
| Timeline |
| Pakistan Aluminium |
| Crescent Steel Allied |
Pakistan Aluminium and Crescent Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Aluminium and Crescent Steel
The main advantage of trading using opposite Pakistan Aluminium and Crescent Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Aluminium position performs unexpectedly, Crescent 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 Crescent Steel will offset losses from the drop in Crescent Steel's long position.| Pakistan Aluminium vs. Habib Insurance | Pakistan Aluminium vs. Pakistan Refinery | Pakistan Aluminium vs. Century Insurance | Pakistan Aluminium vs. Reliance Weaving Mills |
| Crescent Steel vs. Pakistan Aluminium Beverage | Crescent Steel vs. ITTEFAQ Iron Industries | Crescent Steel vs. International Steels | Crescent Steel vs. Mughal Iron Steel |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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