Correlation Between Dost Steels and Adamjee Insurance

Can any of the company-specific risk be diversified away by investing in both Dost Steels and Adamjee Insurance 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 Dost Steels and Adamjee Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dost Steels and Adamjee Insurance, you can compare the effects of market volatilities on Dost Steels and Adamjee Insurance 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 Dost Steels with a short position of Adamjee Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dost Steels and Adamjee Insurance.

Diversification Opportunities for Dost Steels and Adamjee Insurance

-0.01

Correlation Coefficient

Dost Steels  Adamjee Insurance

Good diversification

The 3 months correlation between Dost and Adamjee is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Dost Steels and Adamjee Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adamjee Insurance and Dost Steels 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 Dost Steels are associated (or correlated) with Adamjee Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adamjee Insurance has no effect on the direction of Dost Steels i.e., Dost Steels and Adamjee Insurance go up and down completely randomly.

Pair Corralation between Dost Steels and Adamjee Insurance

Assuming the 90 days trading horizon Dost Steels is expected to generate 1.07 times more return on investment than Adamjee Insurance. However, Dost Steels is 1.07 times more volatile than Adamjee Insurance. It trades about 0.13 of its potential returns per unit of risk. Adamjee Insurance is currently generating about 0.06 per unit of risk. If you would invest  602.00  in Dost Steels on October 26, 2024 and sell it today you would earn a total of  46.00  from holding Dost Steels or generate 7.64% return on investment over 90 days.

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

Dost Steels  vs.  Adamjee Insurance

Dost Steels

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dost Steels are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Dost Steels is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Adamjee Insurance

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adamjee Insurance are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Adamjee Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dost Steels and Adamjee Insurance

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

The idea behind Dost Steels and Adamjee Insurance 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.