Correlation Between Mari Petroleum and Agha Steel

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

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

Diversification Opportunities for Mari Petroleum and Agha Steel

-0.39

Correlation Coefficient

Mari Petroleum  Agha Steel

Very good diversification

The 3 months correlation between Mari and Agha is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Mari Petroleum and Agha Steel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agha Steel Industries and Mari Petroleum 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 Mari Petroleum are associated (or correlated) with Agha Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agha Steel Industries has no effect on the direction of Mari Petroleum i.e., Mari Petroleum and Agha Steel go up and down completely randomly.

Pair Corralation between Mari Petroleum and Agha Steel

Assuming the 90 days trading horizon Mari Petroleum is expected to generate 2.59 times more return on investment than Agha Steel. However, Mari Petroleum is 2.59 times more volatile than Agha Steel Industries. It trades about 0.34 of its potential returns per unit of risk. Agha Steel Industries is currently generating about 0.01 per unit of risk. If you would invest  45,794  in Mari Petroleum on September 29, 2024 and sell it today you would earn a total of  23,191  from holding Mari Petroleum or generate 50.64% return on investment over 90 days.

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

Mari Petroleum  vs.  Agha Steel Industries

Mari Petroleum

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mari Petroleum are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mari Petroleum sustained solid returns over the last few months and may actually be approaching a breakup point.

Agha Steel Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agha Steel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Mari Petroleum and Agha Steel

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

The idea behind Mari Petroleum and Agha Steel Industries 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.