Correlation Between Crescent Steel and Millat Tractors

Can any of the company-specific risk be diversified away by investing in both Crescent 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 Crescent 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 Crescent Steel Allied and Millat Tractors, you can compare the effects of market volatilities on Crescent 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 Crescent Steel with a short position of Millat Tractors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crescent Steel and Millat Tractors.

Diversification Opportunities for Crescent Steel and Millat Tractors

0.17

Correlation Coefficient

Crescent Steel  Millat Tractors

Average diversification

The 3 months correlation between Crescent and Millat is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Crescent Steel Allied and Millat Tractors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Millat Tractors 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 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 Crescent Steel i.e., Crescent Steel and Millat Tractors go up and down completely randomly.

Pair Corralation between Crescent Steel and Millat Tractors

Assuming the 90 days trading horizon Crescent Steel Allied is expected to generate 1.93 times more return on investment than Millat Tractors. However, Crescent Steel is 1.93 times more volatile than Millat Tractors. It trades about 0.07 of its potential returns per unit of risk. Millat Tractors is currently generating about 0.04 per unit of risk. If you would invest  7,129  in Crescent Steel Allied on October 12, 2024 and sell it today you would earn a total of  3,238  from holding Crescent Steel Allied or generate 45.42% return on investment over 90 days.

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

Crescent Steel Allied  vs.  Millat Tractors

Crescent Steel Allied

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Crescent Steel Allied are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Crescent Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Millat Tractors

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Millat Tractors are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Millat Tractors reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crescent Steel and Millat Tractors

The main advantage of trading using opposite Crescent Steel and Millat Tractors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crescent 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.

The idea behind Crescent Steel Allied and Millat Tractors 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.