Correlation Between Beco Steel and Millat Tractors
Can any of the company-specific risk be diversified away by investing in both Beco Steel and Millat Tractors 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 Beco Steel and Millat Tractors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beco Steel and Millat Tractors, you can compare the effects of market volatilities on Beco Steel and Millat Tractors 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 Beco Steel with a short position of Millat Tractors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beco Steel and Millat Tractors.
Diversification Opportunities for Beco Steel and Millat Tractors
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Beco and Millat is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Beco Steel and Millat Tractors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Millat Tractors and Beco 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 Beco Steel are associated (or correlated) with Millat Tractors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Millat Tractors has no effect on the direction of Beco Steel i.e., Beco Steel and Millat Tractors go up and down completely randomly.
Pair Corralation between Beco Steel and Millat Tractors
Assuming the 90 days trading horizon Beco Steel is expected to generate 4.27 times less return on investment than Millat Tractors. In addition to that, Beco Steel is 1.59 times more volatile than Millat Tractors. It trades about 0.02 of its total potential returns per unit of risk. Millat Tractors is currently generating about 0.1 per unit of volatility. If you would invest 28,811 in Millat Tractors on October 21, 2024 and sell it today you would earn a total of 41,479 from holding Millat Tractors or generate 143.97% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 96.49% |
Values | Daily Returns |
Beco Steel vs. Millat Tractors
Performance |
Timeline |
Beco Steel |
Millat Tractors |
Beco Steel and Millat Tractors Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Beco Steel and Millat Tractors
The main advantage of trading using opposite Beco Steel and Millat Tractors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beco Steel position performs unexpectedly, Millat Tractors 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 Millat Tractors will offset losses from the drop in Millat Tractors' long position.Beco Steel vs. Engro Polymer Chemicals | Beco Steel vs. Unilever Pakistan Foods | Beco Steel vs. Air Link Communication | Beco Steel vs. Lotte Chemical Pakistan |
Millat Tractors vs. Reliance Insurance Co | Millat Tractors vs. MCB Investment Manag | Millat Tractors vs. Atlas Insurance | Millat Tractors vs. Pakistan Aluminium Beverage |
Check out your portfolio center.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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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