Correlation Between Masood Textile and National Refinery

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

Diversification Opportunities for Masood Textile and National Refinery

0.05

Correlation Coefficient

Masood Textile  National Refinery

Significant diversification

The 3 months correlation between Masood and National is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Masood Textile Mills and National Refinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Refinery 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 Refinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Refinery has no effect on the direction of Masood Textile i.e., Masood Textile and National Refinery go up and down completely randomly.

Pair Corralation between Masood Textile and National Refinery

Assuming the 90 days trading horizon Masood Textile Mills is expected to generate 1.24 times more return on investment than National Refinery. However, Masood Textile is 1.24 times more volatile than National Refinery. It trades about 0.04 of its potential returns per unit of risk. National Refinery is currently generating about 0.0 per unit of risk. If you would invest  5,331  in Masood Textile Mills on December 2, 2024 and sell it today you would earn a total of  224.00  from holding Masood Textile Mills or generate 4.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	87.3%
Values	Daily Returns

Masood Textile Mills  vs.  National Refinery

Masood Textile Mills

Risk-Adjusted Performance

Insignificant

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

National Refinery

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Refinery has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, National Refinery is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Masood Textile and National Refinery

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

The idea behind Masood Textile Mills and National Refinery 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.