Correlation Between Masood Textile and K Electric

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

Diversification Opportunities for Masood Textile and K Electric

-0.41

Correlation Coefficient

Masood Textile  K Electric

Very good diversification

The 3 months correlation between Masood and KEL is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Masood Textile Mills and K Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K Electric 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 K Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K Electric has no effect on the direction of Masood Textile i.e., Masood Textile and K Electric go up and down completely randomly.

Pair Corralation between Masood Textile and K Electric

Assuming the 90 days trading horizon Masood Textile Mills is expected to under-perform the K Electric. In addition to that, Masood Textile is 1.13 times more volatile than K Electric. It trades about 0.0 of its total potential returns per unit of risk. K Electric is currently generating about 0.2 per unit of volatility. If you would invest  407.00  in K Electric on September 13, 2024 and sell it today you would earn a total of  233.00  from holding K Electric or generate 57.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.13%
Values	Daily Returns

Masood Textile Mills  vs.  K Electric

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.

K Electric

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in K Electric are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, K Electric reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Masood Textile and K Electric

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

The idea behind Masood Textile Mills and K Electric 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.