Correlation Between Crescent Steel and ITTEFAQ Iron

Can any of the company-specific risk be diversified away by investing in both Crescent Steel and ITTEFAQ Iron 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 Crescent Steel and ITTEFAQ Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Crescent Steel Allied and ITTEFAQ Iron Industries, you can compare the effects of market volatilities on Crescent Steel and ITTEFAQ Iron 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 Crescent Steel with a short position of ITTEFAQ Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crescent Steel and ITTEFAQ Iron.

Diversification Opportunities for Crescent Steel and ITTEFAQ Iron

-0.17

Correlation Coefficient

Crescent Steel  ITTEFAQ Iron

Good diversification

The 3 months correlation between Crescent and ITTEFAQ is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Crescent Steel Allied and ITTEFAQ Iron Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITTEFAQ Iron Industries and Crescent 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 Crescent Steel Allied are associated (or correlated) with ITTEFAQ Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITTEFAQ Iron Industries has no effect on the direction of Crescent Steel i.e., Crescent Steel and ITTEFAQ Iron go up and down completely randomly.

Pair Corralation between Crescent Steel and ITTEFAQ Iron

Assuming the 90 days trading horizon Crescent Steel Allied is expected to under-perform the ITTEFAQ Iron. But the stock apears to be less risky and, when comparing its historical volatility, Crescent Steel Allied is 1.09 times less risky than ITTEFAQ Iron. The stock trades about -0.02 of its potential returns per unit of risk. The ITTEFAQ Iron Industries is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  552.00  in ITTEFAQ Iron Industries on October 25, 2024 and sell it today you would earn a total of  274.00  from holding ITTEFAQ Iron Industries or generate 49.64% return on investment over 90 days.

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

Crescent Steel Allied  vs.  ITTEFAQ Iron Industries

Crescent Steel Allied

Risk-Adjusted Performance

0 of 100

Very Weak

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

ITTEFAQ Iron Industries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ITTEFAQ Iron Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, ITTEFAQ Iron reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crescent Steel and ITTEFAQ Iron

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

The idea behind Crescent Steel Allied and ITTEFAQ Iron Industries 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.