Correlation Between Bawany Air and Masood Textile

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

By analyzing existing cross correlation between Bawany Air Products and Masood Textile Mills, you can compare the effects of market volatilities on Bawany Air and Masood Textile 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 Bawany Air with a short position of Masood Textile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bawany Air and Masood Textile.

Diversification Opportunities for Bawany Air and Masood Textile

0.53

Correlation Coefficient

Bawany Air  Masood Textile

Very weak diversification

The 3 months correlation between Bawany and Masood is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Bawany Air Products and Masood Textile Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masood Textile Mills and Bawany Air 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 Bawany Air Products are associated (or correlated) with Masood Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masood Textile Mills has no effect on the direction of Bawany Air i.e., Bawany Air and Masood Textile go up and down completely randomly.

Pair Corralation between Bawany Air and Masood Textile

Assuming the 90 days trading horizon Bawany Air Products is expected to generate 1.11 times more return on investment than Masood Textile. However, Bawany Air is 1.11 times more volatile than Masood Textile Mills. It trades about 0.03 of its potential returns per unit of risk. Masood Textile Mills is currently generating about 0.0 per unit of risk. If you would invest  3,332  in Bawany Air Products on September 16, 2024 and sell it today you would earn a total of  89.00  from holding Bawany Air Products or generate 2.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	80.0%
Values	Daily Returns

Bawany Air Products  vs.  Masood Textile Mills

Bawany Air Products

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bawany Air Products are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bawany Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Masood Textile Mills

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bawany Air and Masood Textile

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

The idea behind Bawany Air Products and Masood Textile Mills 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.