Correlation Between Packages and International Steels
Can any of the company-specific risk be diversified away by investing in both Packages and International 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 Packages and International Steels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Packages and International Steels, you can compare the effects of market volatilities on Packages and International 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 Packages with a short position of International Steels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Packages and International Steels.
Diversification Opportunities for Packages and International Steels
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Packages and International is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Packages and International Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Steels and Packages 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 Packages are associated (or correlated) with International Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Steels has no effect on the direction of Packages i.e., Packages and International Steels go up and down completely randomly.
Pair Corralation between Packages and International Steels
Assuming the 90 days trading horizon Packages is expected to generate 1.35 times more return on investment than International Steels. However, Packages is 1.35 times more volatile than International Steels. It trades about 0.36 of its potential returns per unit of risk. International Steels is currently generating about 0.05 per unit of risk. If you would invest 43,665 in Packages on August 30, 2024 and sell it today you would earn a total of 11,761 from holding Packages or generate 26.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Packages vs. International Steels
Performance |
| Timeline |
| Packages |
| International Steels |
Packages and International Steels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Packages and International Steels
The main advantage of trading using opposite Packages and International Steels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Packages position performs unexpectedly, International 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 International Steels will offset losses from the drop in International Steels' long position.| Packages vs. Masood Textile Mills | Packages vs. Fauji Foods | Packages vs. KSB Pumps | Packages vs. Mari Petroleum |
| International Steels vs. Oil and Gas | International Steels vs. Roshan Packages | International Steels vs. WorldCall Telecom | International Steels vs. Air Link Communication |
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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