Correlation Between Crescent Steel and Sindh Modaraba

Can any of the company-specific risk be diversified away by investing in both Crescent Steel and Sindh Modaraba 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 Sindh Modaraba 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 Sindh Modaraba Management, you can compare the effects of market volatilities on Crescent Steel and Sindh Modaraba 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 Sindh Modaraba. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crescent Steel and Sindh Modaraba.

Diversification Opportunities for Crescent Steel and Sindh Modaraba

-0.44

Correlation Coefficient

Crescent Steel  Sindh Modaraba

Very good diversification

The 3 months correlation between Crescent and Sindh is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Crescent Steel Allied and Sindh Modaraba Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sindh Modaraba Management 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 Sindh Modaraba. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sindh Modaraba Management has no effect on the direction of Crescent Steel i.e., Crescent Steel and Sindh Modaraba go up and down completely randomly.

Pair Corralation between Crescent Steel and Sindh Modaraba

Assuming the 90 days trading horizon Crescent Steel Allied is expected to generate 1.83 times more return on investment than Sindh Modaraba. However, Crescent Steel is 1.83 times more volatile than Sindh Modaraba Management. It trades about 0.09 of its potential returns per unit of risk. Sindh Modaraba Management is currently generating about 0.04 per unit of risk. If you would invest  9,077  in Crescent Steel Allied on October 10, 2024 and sell it today you would earn a total of  2,137  from holding Crescent Steel Allied or generate 23.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.16%
Values	Daily Returns

Crescent Steel Allied  vs.  Sindh Modaraba Management

Crescent Steel Allied

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crescent Steel Allied are ranked lower than 7 (%) 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.

Sindh Modaraba Management

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Crescent Steel and Sindh Modaraba

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

The idea behind Crescent Steel Allied and Sindh Modaraba Management 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.