Correlation Between Agha Steel and Gul Ahmed

Can any of the company-specific risk be diversified away by investing in both Agha Steel and Gul Ahmed 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 Gul Ahmed 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 Gul Ahmed Textile, you can compare the effects of market volatilities on Agha Steel and Gul Ahmed 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 Gul Ahmed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agha Steel and Gul Ahmed.

Diversification Opportunities for Agha Steel and Gul Ahmed

0.61

Correlation Coefficient

Agha Steel  Gul Ahmed

Poor diversification

The 3 months correlation between Agha and Gul is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Agha Steel Industries and Gul Ahmed Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gul Ahmed Textile 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 Gul Ahmed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gul Ahmed Textile has no effect on the direction of Agha Steel i.e., Agha Steel and Gul Ahmed go up and down completely randomly.

Pair Corralation between Agha Steel and Gul Ahmed

Assuming the 90 days trading horizon Agha Steel Industries is expected to under-perform the Gul Ahmed. But the stock apears to be less risky and, when comparing its historical volatility, Agha Steel Industries is 1.19 times less risky than Gul Ahmed. The stock trades about -0.13 of its potential returns per unit of risk. The Gul Ahmed Textile is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,389  in Gul Ahmed Textile on December 3, 2024 and sell it today you would lose (52.00) from holding Gul Ahmed Textile or give up 2.18% of portfolio value over 90 days.

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

Agha Steel Industries  vs.  Gul Ahmed Textile

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 conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Gul Ahmed Textile

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gul Ahmed Textile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Gul Ahmed 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 Gul Ahmed

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

The idea behind Agha Steel Industries and Gul Ahmed Textile 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 Stocks Directory module to find actively traded stocks across global markets.