Correlation Between Dost Steels and Habib Metropolitan

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

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

Diversification Opportunities for Dost Steels and Habib Metropolitan

0.64

Correlation Coefficient

Dost Steels  Habib Metropolitan

Poor diversification

The 3 months correlation between Dost and Habib is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Dost Steels and Habib Metropolitan Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Metropolitan Bank 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 Habib Metropolitan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Metropolitan Bank has no effect on the direction of Dost Steels i.e., Dost Steels and Habib Metropolitan go up and down completely randomly.

Pair Corralation between Dost Steels and Habib Metropolitan

Assuming the 90 days trading horizon Dost Steels is expected to generate 1.35 times less return on investment than Habib Metropolitan. In addition to that, Dost Steels is 1.26 times more volatile than Habib Metropolitan Bank. It trades about 0.06 of its total potential returns per unit of risk. Habib Metropolitan Bank is currently generating about 0.09 per unit of volatility. If you would invest  7,932  in Habib Metropolitan Bank on December 22, 2024 and sell it today you would earn a total of  928.00  from holding Habib Metropolitan Bank or generate 11.7% return on investment over 90 days.

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

Dost Steels  vs.  Habib Metropolitan Bank

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.

Habib Metropolitan Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Metropolitan Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Habib Metropolitan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dost Steels and Habib Metropolitan

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

The idea behind Dost Steels and Habib Metropolitan Bank 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.