Correlation Between Metropolitan Steel and Agha Steel

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

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

Diversification Opportunities for Metropolitan Steel and Agha Steel

0.53

Correlation Coefficient

Metropolitan Steel  Agha Steel

Very weak diversification

The 3 months correlation between Metropolitan and Agha is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan Steel Corp 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 Metropolitan Steel 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 Metropolitan Steel Corp 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 Metropolitan Steel i.e., Metropolitan Steel and Agha Steel go up and down completely randomly.

Pair Corralation between Metropolitan Steel and Agha Steel

Assuming the 90 days trading horizon Metropolitan Steel Corp is expected to under-perform the Agha Steel. In addition to that, Metropolitan Steel is 1.46 times more volatile than Agha Steel Industries. It trades about -0.1 of its total potential returns per unit of risk. Agha Steel Industries is currently generating about -0.08 per unit of volatility. If you would invest  1,313  in Agha Steel Industries on September 15, 2024 and sell it today you would lose (220.00) from holding Agha Steel Industries or give up 16.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Metropolitan Steel Corp  vs.  Agha Steel Industries

Metropolitan Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metropolitan Steel Corp 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.

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 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.

Pair Trading with Metropolitan Steel and Agha Steel

The main advantage of trading using opposite Metropolitan Steel and Agha Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan Steel 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 Metropolitan Steel Corp 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.