Correlation Between Masood Textile and Bawany Air

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

By analyzing existing cross correlation between Masood Textile Mills and Bawany Air Products, you can compare the effects of market volatilities on Masood Textile and Bawany Air 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 Masood Textile with a short position of Bawany Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Masood Textile and Bawany Air.

Diversification Opportunities for Masood Textile and Bawany Air

0.53

Correlation Coefficient

Masood Textile  Bawany Air

Very weak diversification

The 3 months correlation between Masood and Bawany is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Masood Textile Mills and Bawany Air Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bawany Air Products and Masood Textile 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 Masood Textile Mills are associated (or correlated) with Bawany Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bawany Air Products has no effect on the direction of Masood Textile i.e., Masood Textile and Bawany Air go up and down completely randomly.

Pair Corralation between Masood Textile and Bawany Air

Assuming the 90 days trading horizon Masood Textile is expected to generate 1.92 times less return on investment than Bawany Air. But when comparing it to its historical volatility, Masood Textile Mills is 1.19 times less risky than Bawany Air. It trades about 0.06 of its potential returns per unit of risk. Bawany Air Products is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  975.00  in Bawany Air Products on September 16, 2024 and sell it today you would earn a total of  2,446  from holding Bawany Air Products or generate 250.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	72.97%
Values	Daily Returns

Masood Textile Mills  vs.  Bawany Air Products

Masood Textile Mills

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Masood Textile Mills has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Masood Textile is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bawany Air Products

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bawany Air Products are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bawany Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Masood Textile and Bawany Air

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

The idea behind Masood Textile Mills and Bawany Air Products 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.