Correlation Between Dost Steels and IGI Life

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

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

Diversification Opportunities for Dost Steels and IGI Life

-0.06

Correlation Coefficient

Dost Steels  IGI Life

Good diversification

The 3 months correlation between Dost and IGI is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Dost Steels and IGI Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGI Life 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 IGI Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGI Life Insurance has no effect on the direction of Dost Steels i.e., Dost Steels and IGI Life go up and down completely randomly.

Pair Corralation between Dost Steels and IGI Life

Assuming the 90 days trading horizon Dost Steels is expected to generate 1.51 times less return on investment than IGI Life. But when comparing it to its historical volatility, Dost Steels is 1.14 times less risky than IGI Life. It trades about 0.01 of its potential returns per unit of risk. IGI Life Insurance is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,395  in IGI Life Insurance on October 25, 2024 and sell it today you would lose (1.00) from holding IGI Life Insurance or give up 0.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.55%
Values	Daily Returns

Dost Steels  vs.  IGI Life Insurance

Dost Steels

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Dost Steels has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Dost Steels is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

IGI Life Insurance

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IGI Life Insurance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IGI Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dost Steels and IGI Life

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

The idea behind Dost Steels and IGI Life 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.

Check out your portfolio center.

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.