Correlation Between Reliance Weaving and Agha Steel
Can any of the company-specific risk be diversified away by investing in both Reliance Weaving and Agha 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 Reliance Weaving and Agha Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reliance Weaving Mills and Agha Steel Industries, you can compare the effects of market volatilities on Reliance Weaving and Agha 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 Reliance Weaving with a short position of Agha Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Weaving and Agha Steel.
Diversification Opportunities for Reliance Weaving and Agha Steel
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Reliance and Agha is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Weaving Mills and Agha Steel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agha Steel Industries and Reliance Weaving 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 Reliance Weaving Mills are associated (or correlated) with Agha Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agha Steel Industries has no effect on the direction of Reliance Weaving i.e., Reliance Weaving and Agha Steel go up and down completely randomly.
Pair Corralation between Reliance Weaving and Agha Steel
Assuming the 90 days trading horizon Reliance Weaving Mills is expected to generate 1.7 times more return on investment than Agha Steel. However, Reliance Weaving is 1.7 times more volatile than Agha Steel Industries. It trades about 0.29 of its potential returns per unit of risk. Agha Steel Industries is currently generating about -0.33 per unit of risk. If you would invest 8,324 in Reliance Weaving Mills on August 30, 2024 and sell it today you would earn a total of 3,176 from holding Reliance Weaving Mills or generate 38.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Reliance Weaving Mills vs. Agha Steel Industries
Performance |
| Timeline |
| Reliance Weaving Mills |
| Agha Steel Industries |
Reliance Weaving and Agha Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Weaving and Agha Steel
The main advantage of trading using opposite Reliance Weaving and Agha Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Weaving position performs unexpectedly, Agha 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 Agha Steel will offset losses from the drop in Agha Steel's long position.| Reliance Weaving vs. WorldCall Telecom | Reliance Weaving vs. Pakistan Telecommunication | Reliance Weaving vs. Air Link Communication | Reliance Weaving vs. Unity Foods |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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