Correlation Between Loads and Dost Steels

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

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

Diversification Opportunities for Loads and Dost Steels

0.72

Correlation Coefficient

Loads  Dost Steels

Poor diversification

The 3 months correlation between Loads and Dost is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Loads and Dost Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dost Steels and Loads 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 Loads are associated (or correlated) with Dost Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dost Steels has no effect on the direction of Loads i.e., Loads and Dost Steels go up and down completely randomly.

Pair Corralation between Loads and Dost Steels

Assuming the 90 days trading horizon Loads is expected to generate 1.31 times more return on investment than Dost Steels. However, Loads is 1.31 times more volatile than Dost Steels. It trades about 0.21 of its potential returns per unit of risk. Dost Steels is currently generating about 0.07 per unit of risk. If you would invest  1,028  in Loads on September 15, 2024 and sell it today you would earn a total of  527.00  from holding Loads or generate 51.26% return on investment over 90 days.

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

Loads  vs.  Dost Steels

Loads

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Loads are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Loads disclosed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Loads and Dost Steels

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

The idea behind Loads and Dost Steels 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.