Correlation Between International Steels and Roshan Packages

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

By analyzing existing cross correlation between International Steels and Roshan Packages, you can compare the effects of market volatilities on International Steels and Roshan Packages 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 International Steels with a short position of Roshan Packages. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Steels and Roshan Packages.

Diversification Opportunities for International Steels and Roshan Packages

0.56

Correlation Coefficient

International Steels  Roshan Packages

Very weak diversification

The 3 months correlation between International and Roshan is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding International Steels and Roshan Packages in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roshan Packages and International 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 International Steels are associated (or correlated) with Roshan Packages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roshan Packages has no effect on the direction of International Steels i.e., International Steels and Roshan Packages go up and down completely randomly.

Pair Corralation between International Steels and Roshan Packages

Assuming the 90 days trading horizon International Steels is expected to generate 0.9 times more return on investment than Roshan Packages. However, International Steels is 1.12 times less risky than Roshan Packages. It trades about 0.16 of its potential returns per unit of risk. Roshan Packages is currently generating about 0.08 per unit of risk. If you would invest  7,101  in International Steels on October 25, 2024 and sell it today you would earn a total of  2,074  from holding International Steels or generate 29.21% return on investment over 90 days.

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

International Steels  vs.  Roshan Packages

International Steels

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Steels are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, International Steels reported solid returns over the last few months and may actually be approaching a breakup point.

Roshan Packages

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Roshan Packages are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Roshan Packages reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Steels and Roshan Packages

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

The idea behind International Steels and Roshan Packages 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.