Correlation Between Masood Textile and National Foods

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

Diversification Opportunities for Masood Textile and National Foods

0.12

Correlation Coefficient

Masood Textile  National Foods

Average diversification

The 3 months correlation between Masood and National is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Masood Textile Mills and National Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Foods 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 National Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Foods has no effect on the direction of Masood Textile i.e., Masood Textile and National Foods go up and down completely randomly.

Pair Corralation between Masood Textile and National Foods

Assuming the 90 days trading horizon Masood Textile Mills is expected to under-perform the National Foods. In addition to that, Masood Textile is 2.79 times more volatile than National Foods. It trades about -0.05 of its total potential returns per unit of risk. National Foods is currently generating about 0.12 per unit of volatility. If you would invest  16,976  in National Foods on September 13, 2024 and sell it today you would earn a total of  1,963  from holding National Foods or generate 11.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	77.78%
Values	Daily Returns

Masood Textile Mills  vs.  National Foods

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

National Foods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Foods are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, National Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Masood Textile and National Foods

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

The idea behind Masood Textile Mills and National Foods 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.