Correlation Between Shifa International and International Steels
Can any of the company-specific risk be diversified away by investing in both Shifa International 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 Shifa International and International Steels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shifa International Hospitals and International Steels, you can compare the effects of market volatilities on Shifa International 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 Shifa International with a short position of International Steels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shifa International and International Steels.
Diversification Opportunities for Shifa International and International Steels
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shifa and International is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Shifa International Hospitals and International Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Steels and Shifa International 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 Shifa International Hospitals 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 Shifa International i.e., Shifa International and International Steels go up and down completely randomly.
Pair Corralation between Shifa International and International Steels
Assuming the 90 days trading horizon Shifa International is expected to generate 2.14 times less return on investment than International Steels. But when comparing it to its historical volatility, Shifa International Hospitals is 1.06 times less risky than International Steels. It trades about 0.1 of its potential returns per unit of risk. International Steels is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 7,464 in International Steels on September 12, 2024 and sell it today you would earn a total of 1,189 from holding International Steels or generate 15.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shifa International Hospitals vs. International Steels
Performance |
| Timeline |
| Shifa International |
| International Steels |
Shifa International and International Steels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shifa International and International Steels
The main advantage of trading using opposite Shifa International and International Steels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shifa International 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.| Shifa International vs. Oil and Gas | Shifa International vs. Pakistan State Oil | Shifa International vs. Pakistan Petroleum | Shifa International vs. Fauji Fertilizer |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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