Correlation Between Dost Steels and Thatta Cement

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

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

Diversification Opportunities for Dost Steels and Thatta Cement

-0.31

Correlation Coefficient

Dost Steels  Thatta Cement

Very good diversification

The 3 months correlation between Dost and Thatta is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Dost Steels and Thatta Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thatta Cement 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 Thatta Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thatta Cement has no effect on the direction of Dost Steels i.e., Dost Steels and Thatta Cement go up and down completely randomly.

Pair Corralation between Dost Steels and Thatta Cement

Assuming the 90 days trading horizon Dost Steels is expected to under-perform the Thatta Cement. But the stock apears to be less risky and, when comparing its historical volatility, Dost Steels is 1.07 times less risky than Thatta Cement. The stock trades about -0.06 of its potential returns per unit of risk. The Thatta Cement is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  22,057  in Thatta Cement on December 28, 2024 and sell it today you would lose (338.00) from holding Thatta Cement or give up 1.53% of portfolio value over 90 days.

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

Dost Steels  vs.  Thatta Cement

Dost Steels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dost Steels has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Thatta Cement

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thatta Cement has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Thatta Cement is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Dost Steels and Thatta Cement

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

The idea behind Dost Steels and Thatta Cement 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.