Correlation Between Dost Steels and Wah Nobel

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

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

Diversification Opportunities for Dost Steels and Wah Nobel

-0.43

Correlation Coefficient

Dost Steels  Wah Nobel

Very good diversification

The 3 months correlation between Dost and Wah is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Dost Steels and Wah Nobel Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Nobel Chemicals 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 Wah Nobel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Nobel Chemicals has no effect on the direction of Dost Steels i.e., Dost Steels and Wah Nobel go up and down completely randomly.

Pair Corralation between Dost Steels and Wah Nobel

Assuming the 90 days trading horizon Dost Steels is expected to generate 1.06 times more return on investment than Wah Nobel. However, Dost Steels is 1.06 times more volatile than Wah Nobel Chemicals. It trades about 0.09 of its potential returns per unit of risk. Wah Nobel Chemicals is currently generating about -0.11 per unit of risk. If you would invest  605.00  in Dost Steels on December 20, 2024 and sell it today you would earn a total of  82.00  from holding Dost Steels or generate 13.55% 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.  Wah Nobel Chemicals

Dost Steels

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dost Steels are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Dost Steels reported solid returns over the last few months and may actually be approaching a breakup point.

Wah Nobel Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wah Nobel Chemicals 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 Wah Nobel

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

The idea behind Dost Steels and Wah Nobel Chemicals 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.