Correlation Between Amreli Steels and Gul Ahmed

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

By analyzing existing cross correlation between Amreli Steels and Gul Ahmed Textile, you can compare the effects of market volatilities on Amreli Steels 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 Amreli Steels with a short position of Gul Ahmed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amreli Steels and Gul Ahmed.

Diversification Opportunities for Amreli Steels and Gul Ahmed

0.23

Correlation Coefficient

Amreli Steels  Gul Ahmed

Modest diversification

The 3 months correlation between Amreli and Gul is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Amreli Steels 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 Amreli Steels 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 Amreli Steels 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 Amreli Steels i.e., Amreli Steels and Gul Ahmed go up and down completely randomly.

Pair Corralation between Amreli Steels and Gul Ahmed

Assuming the 90 days trading horizon Amreli Steels is expected to under-perform the Gul Ahmed. In addition to that, Amreli Steels is 1.21 times more volatile than Gul Ahmed Textile. It trades about -0.03 of its total potential returns per unit of risk. Gul Ahmed Textile is currently generating about 0.19 per unit of volatility. If you would invest  1,877  in Gul Ahmed Textile on September 12, 2024 and sell it today you would earn a total of  707.00  from holding Gul Ahmed Textile or generate 37.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Amreli Steels  vs.  Gul Ahmed Textile

Amreli Steels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amreli Steels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Amreli Steels is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gul Ahmed Textile

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gul Ahmed Textile are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Gul Ahmed sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amreli Steels and Gul Ahmed

The main advantage of trading using opposite Amreli Steels and Gul Ahmed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amreli Steels 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 Amreli Steels 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.