Correlation Between Dost Steels and Bawany Air

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

By analyzing existing cross correlation between Dost Steels and Bawany Air Products, you can compare the effects of market volatilities on Dost Steels and Bawany Air 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 Bawany Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dost Steels and Bawany Air.

Diversification Opportunities for Dost Steels and Bawany Air

-0.57

Correlation Coefficient

Dost Steels  Bawany Air

Excellent diversification

The 3 months correlation between Dost and Bawany is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dost Steels and Bawany Air Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bawany Air Products 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 Bawany Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bawany Air Products has no effect on the direction of Dost Steels i.e., Dost Steels and Bawany Air go up and down completely randomly.

Pair Corralation between Dost Steels and Bawany Air

Assuming the 90 days trading horizon Dost Steels is expected to generate 0.73 times more return on investment than Bawany Air. However, Dost Steels is 1.37 times less risky than Bawany Air. It trades about 0.06 of its potential returns per unit of risk. Bawany Air Products is currently generating about -0.18 per unit of risk. If you would invest  628.00  in Dost Steels on December 22, 2024 and sell it today you would earn a total of  46.00  from holding Dost Steels or generate 7.32% return on investment over 90 days.

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

Dost Steels  vs.  Bawany Air Products

Dost Steels

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dost Steels are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Dost Steels may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Bawany Air Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bawany Air Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dost Steels and Bawany Air

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

The idea behind Dost Steels and Bawany Air Products 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.