Correlation Between Dost Steels and National Refinery

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

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

Diversification Opportunities for Dost Steels and National Refinery

0.68

Correlation Coefficient

Dost Steels  National Refinery

Poor diversification

The 3 months correlation between Dost and National is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dost Steels and National Refinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Refinery 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 National Refinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Refinery has no effect on the direction of Dost Steels i.e., Dost Steels and National Refinery go up and down completely randomly.

Pair Corralation between Dost Steels and National Refinery

Assuming the 90 days trading horizon Dost Steels is expected to generate 2.91 times less return on investment than National Refinery. But when comparing it to its historical volatility, Dost Steels is 1.13 times less risky than National Refinery. It trades about 0.07 of its potential returns per unit of risk. National Refinery is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  20,952  in National Refinery on September 15, 2024 and sell it today you would earn a total of  7,447  from holding National Refinery or generate 35.54% 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.  National Refinery

Dost Steels

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dost Steels are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Dost Steels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

National Refinery

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Refinery are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, National Refinery reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dost Steels and National Refinery

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

The idea behind Dost Steels and National Refinery 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.