Correlation Between Agha Steel and Shifa International

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

Diversification Opportunities for Agha Steel and Shifa International

-0.48

Correlation Coefficient

Agha Steel  Shifa International

Very good diversification

The 3 months correlation between Agha and Shifa is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Agha Steel Industries and Shifa International Hospitals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shifa International 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 Shifa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shifa International has no effect on the direction of Agha Steel i.e., Agha Steel and Shifa International go up and down completely randomly.

Pair Corralation between Agha Steel and Shifa International

Assuming the 90 days trading horizon Agha Steel Industries is expected to generate 0.75 times more return on investment than Shifa International. However, Agha Steel Industries is 1.33 times less risky than Shifa International. It trades about -0.03 of its potential returns per unit of risk. Shifa International Hospitals is currently generating about -0.03 per unit of risk. If you would invest  1,109  in Agha Steel Industries on October 9, 2024 and sell it today you would lose (30.00) from holding Agha Steel Industries or give up 2.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Agha Steel Industries  vs.  Shifa International Hospitals

Agha Steel Industries

Risk-Adjusted Performance

0 of 100

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 somewhat strong basic indicators, Agha Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shifa International

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shifa International Hospitals are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shifa International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agha Steel and Shifa International

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

The idea behind Agha Steel Industries and Shifa International Hospitals 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.