Correlation Between Masood Textile and Crescent Star

Can any of the company-specific risk be diversified away by investing in both Masood Textile and Crescent Star 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 Crescent Star 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 Crescent Star Insurance, you can compare the effects of market volatilities on Masood Textile and Crescent Star 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 Crescent Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Masood Textile and Crescent Star.

Diversification Opportunities for Masood Textile and Crescent Star

-0.66

Correlation Coefficient

Masood Textile  Crescent Star

Excellent diversification

The 3 months correlation between Masood and Crescent is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Masood Textile Mills and Crescent Star Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Star Insurance 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 Crescent Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Star Insurance has no effect on the direction of Masood Textile i.e., Masood Textile and Crescent Star go up and down completely randomly.

Pair Corralation between Masood Textile and Crescent Star

Assuming the 90 days trading horizon Masood Textile Mills is expected to generate 1.78 times more return on investment than Crescent Star. However, Masood Textile is 1.78 times more volatile than Crescent Star Insurance. It trades about 0.02 of its potential returns per unit of risk. Crescent Star Insurance is currently generating about -0.13 per unit of risk. If you would invest  5,617  in Masood Textile Mills on December 4, 2024 and sell it today you would lose (62.00) from holding Masood Textile Mills or give up 1.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	86.89%
Values	Daily Returns

Masood Textile Mills  vs.  Crescent Star Insurance

Masood Textile Mills

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Masood Textile Mills are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Crescent Star Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Crescent Star Insurance 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Masood Textile and Crescent Star

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

The idea behind Masood Textile Mills and Crescent Star Insurance 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.