Correlation Between Khyber Tobacco and Crescent Steel

Can any of the company-specific risk be diversified away by investing in both Khyber Tobacco and Crescent Steel 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 Khyber Tobacco and Crescent Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Khyber Tobacco and Crescent Steel Allied, you can compare the effects of market volatilities on Khyber Tobacco and Crescent Steel 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 Khyber Tobacco with a short position of Crescent Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Khyber Tobacco and Crescent Steel.

Diversification Opportunities for Khyber Tobacco and Crescent Steel

-0.14

Correlation Coefficient

Khyber Tobacco  Crescent Steel

Good diversification

The 3 months correlation between Khyber and Crescent is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Khyber Tobacco and Crescent Steel Allied in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Steel Allied and Khyber Tobacco 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 Khyber Tobacco are associated (or correlated) with Crescent Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Steel Allied has no effect on the direction of Khyber Tobacco i.e., Khyber Tobacco and Crescent Steel go up and down completely randomly.

Pair Corralation between Khyber Tobacco and Crescent Steel

Assuming the 90 days trading horizon Khyber Tobacco is expected to under-perform the Crescent Steel. In addition to that, Khyber Tobacco is 1.02 times more volatile than Crescent Steel Allied. It trades about -0.24 of its total potential returns per unit of risk. Crescent Steel Allied is currently generating about 0.14 per unit of volatility. If you would invest  7,269  in Crescent Steel Allied on September 3, 2024 and sell it today you would earn a total of  2,980  from holding Crescent Steel Allied or generate 41.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	62.5%
Values	Daily Returns

Khyber Tobacco  vs.  Crescent Steel Allied

Khyber Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Khyber Tobacco 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Crescent Steel Allied

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crescent Steel Allied are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Crescent Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Khyber Tobacco and Crescent Steel

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

The idea behind Khyber Tobacco and Crescent Steel Allied 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.