Correlation Between Silkbank and Metropolitan Steel
Can any of the company-specific risk be diversified away by investing in both Silkbank and Metropolitan 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 Silkbank and Metropolitan Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Silkbank and Metropolitan Steel Corp, you can compare the effects of market volatilities on Silkbank and Metropolitan 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 Silkbank with a short position of Metropolitan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silkbank and Metropolitan Steel.
Diversification Opportunities for Silkbank and Metropolitan Steel
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Silkbank and Metropolitan is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Silkbank and Metropolitan Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan Steel Corp and Silkbank 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 Silkbank are associated (or correlated) with Metropolitan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan Steel Corp has no effect on the direction of Silkbank i.e., Silkbank and Metropolitan Steel go up and down completely randomly.
Pair Corralation between Silkbank and Metropolitan Steel
Assuming the 90 days trading horizon Silkbank is expected to generate 1.18 times more return on investment than Metropolitan Steel. However, Silkbank is 1.18 times more volatile than Metropolitan Steel Corp. It trades about -0.07 of its potential returns per unit of risk. Metropolitan Steel Corp is currently generating about -0.25 per unit of risk. If you would invest 103.00 in Silkbank on November 5, 2024 and sell it today you would lose (3.00) from holding Silkbank or give up 2.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Silkbank vs. Metropolitan Steel Corp
Performance |
| Timeline |
| Silkbank |
| Metropolitan Steel Corp |
Silkbank and Metropolitan Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silkbank and Metropolitan Steel
The main advantage of trading using opposite Silkbank and Metropolitan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silkbank position performs unexpectedly, Metropolitan 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 Metropolitan Steel will offset losses from the drop in Metropolitan Steel's long position.| Silkbank vs. Data Agro | Silkbank vs. IBL HealthCare | Silkbank vs. Air Link Communication | Silkbank vs. Ittehad Chemicals |
| Metropolitan Steel vs. Air Link Communication | Metropolitan Steel vs. Unilever Pakistan Foods | Metropolitan Steel vs. Pakistan Telecommunication | Metropolitan Steel vs. Bawany Air Products |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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