Correlation Between Masood Textile and First Credit

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

Diversification Opportunities for Masood Textile and First Credit

0.14

Correlation Coefficient

Masood Textile  First Credit

Average diversification

The 3 months correlation between Masood and First is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Masood Textile Mills and First Credit And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Credit And 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 First Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Credit And has no effect on the direction of Masood Textile i.e., Masood Textile and First Credit go up and down completely randomly.

Pair Corralation between Masood Textile and First Credit

Assuming the 90 days trading horizon Masood Textile Mills is expected to under-perform the First Credit. But the stock apears to be less risky and, when comparing its historical volatility, Masood Textile Mills is 1.06 times less risky than First Credit. The stock trades about 0.0 of its potential returns per unit of risk. The First Credit And is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  782.00  in First Credit And on September 15, 2024 and sell it today you would earn a total of  87.00  from holding First Credit And or generate 11.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	87.93%
Values	Daily Returns

Masood Textile Mills  vs.  First Credit And

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 latest stock price disturbance, may contribute to short-term losses for the investors.

First Credit And

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Credit And are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, First Credit disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Masood Textile and First Credit

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

The idea behind Masood Textile Mills and First Credit And 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.