Correlation Between Agha Steel and Crescent Steel

Can any of the company-specific risk be diversified away by investing in both Agha Steel and Crescent 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 Agha Steel and Crescent Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Agha Steel Industries and Crescent Steel Allied, you can compare the effects of market volatilities on Agha Steel and Crescent 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 Agha Steel with a short position of Crescent Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agha Steel and Crescent Steel.

Diversification Opportunities for Agha Steel and Crescent Steel

0.05

Correlation Coefficient

Agha Steel  Crescent Steel

Significant diversification

The 3 months correlation between Agha and Crescent is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Agha Steel Industries and Crescent Steel Allied in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Steel Allied and Agha Steel 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 Agha Steel Industries are associated (or correlated) with Crescent Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Steel Allied has no effect on the direction of Agha Steel i.e., Agha Steel and Crescent Steel go up and down completely randomly.

Pair Corralation between Agha Steel and Crescent Steel

Assuming the 90 days trading horizon Agha Steel Industries is expected to under-perform the Crescent Steel. But the stock apears to be less risky and, when comparing its historical volatility, Agha Steel Industries is 1.62 times less risky than Crescent Steel. The stock trades about -0.06 of its potential returns per unit of risk. The Crescent Steel Allied is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  10,569  in Crescent Steel Allied on December 23, 2024 and sell it today you would earn a total of  50.00  from holding Crescent Steel Allied or generate 0.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Agha Steel Industries  vs.  Crescent Steel Allied

Agha Steel Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agha Steel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Crescent Steel Allied

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Crescent Steel Allied are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Crescent Steel is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Agha Steel and Crescent Steel

The main advantage of trading using opposite Agha Steel and Crescent Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agha Steel position performs unexpectedly, Crescent 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 Crescent Steel will offset losses from the drop in Crescent Steel's long position.

The idea behind Agha Steel Industries and Crescent Steel Allied 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.