Correlation Between Shadab Textile and East West

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Can any of the company-specific risk be diversified away by investing in both Shadab Textile and East West 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 Shadab Textile and East West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shadab Textile Mills and East West Insurance, you can compare the effects of market volatilities on Shadab Textile and East West 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 Shadab Textile with a short position of East West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shadab Textile and East West.

Diversification Opportunities for Shadab Textile and East West

0.02
  Correlation Coefficient

Significant diversification

The 3 months correlation between Shadab and East is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Shadab Textile Mills and East West Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East West Insurance and Shadab Textile 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 Shadab Textile Mills are associated (or correlated) with East West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East West Insurance has no effect on the direction of Shadab Textile i.e., Shadab Textile and East West go up and down completely randomly.

Pair Corralation between Shadab Textile and East West

If you would invest  2,159  in Shadab Textile Mills on October 26, 2024 and sell it today you would lose (9.00) from holding Shadab Textile Mills or give up 0.42% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy33.33%
ValuesDaily Returns

Shadab Textile Mills  vs.  East West Insurance

 Performance 
       Timeline  
Shadab Textile Mills 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Shadab Textile Mills are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shadab Textile sustained solid returns over the last few months and may actually be approaching a breakup point.
East West Insurance 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in East West Insurance are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, East West sustained solid returns over the last few months and may actually be approaching a breakup point.

Shadab Textile and East West Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shadab Textile and East West

The main advantage of trading using opposite Shadab Textile and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shadab Textile position performs unexpectedly, East West 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 East West will offset losses from the drop in East West's long position.
The idea behind Shadab Textile Mills and East West Insurance pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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