Correlation Between Masood Textile and JS Investments

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

Diversification Opportunities for Masood Textile and JS Investments

-0.38

Correlation Coefficient

Masood Textile  JS Investments

Very good diversification

The 3 months correlation between Masood and JSIL is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Masood Textile Mills and JS Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JS Investments 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 JS Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JS Investments has no effect on the direction of Masood Textile i.e., Masood Textile and JS Investments go up and down completely randomly.

Pair Corralation between Masood Textile and JS Investments

Assuming the 90 days trading horizon Masood Textile Mills is expected to generate 1.33 times more return on investment than JS Investments. However, Masood Textile is 1.33 times more volatile than JS Investments. It trades about 0.2 of its potential returns per unit of risk. JS Investments is currently generating about 0.16 per unit of risk. If you would invest  4,489  in Masood Textile Mills on September 14, 2024 and sell it today you would earn a total of  798.00  from holding Masood Textile Mills or generate 17.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

Masood Textile Mills  vs.  JS Investments

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.

JS Investments

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JS Investments are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JS Investments may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Masood Textile and JS Investments

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

The idea behind Masood Textile Mills and JS Investments 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.