Correlation Between Millat Tractors and AKD Hospitality

Can any of the company-specific risk be diversified away by investing in both Millat Tractors and AKD Hospitality 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 Millat Tractors and AKD Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Millat Tractors and AKD Hospitality, you can compare the effects of market volatilities on Millat Tractors and AKD Hospitality 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 Millat Tractors with a short position of AKD Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Millat Tractors and AKD Hospitality.

Diversification Opportunities for Millat Tractors and AKD Hospitality

0.83

Correlation Coefficient

Millat Tractors  AKD Hospitality

Very poor diversification

The 3 months correlation between Millat and AKD is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Millat Tractors and AKD Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKD Hospitality and Millat Tractors 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 Millat Tractors are associated (or correlated) with AKD Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKD Hospitality has no effect on the direction of Millat Tractors i.e., Millat Tractors and AKD Hospitality go up and down completely randomly.

Pair Corralation between Millat Tractors and AKD Hospitality

Assuming the 90 days trading horizon Millat Tractors is expected to generate 0.9 times more return on investment than AKD Hospitality. However, Millat Tractors is 1.11 times less risky than AKD Hospitality. It trades about 0.11 of its potential returns per unit of risk. AKD Hospitality is currently generating about 0.06 per unit of risk. If you would invest  59,065  in Millat Tractors on October 4, 2024 and sell it today you would earn a total of  3,064  from holding Millat Tractors or generate 5.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Millat Tractors  vs.  AKD Hospitality

Millat Tractors

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Millat Tractors are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Millat Tractors may actually be approaching a critical reversion point that can send shares even higher in February 2025.

AKD Hospitality

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AKD Hospitality are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, AKD Hospitality disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Millat Tractors and AKD Hospitality

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

The idea behind Millat Tractors and AKD Hospitality 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 Global Correlations module to find global opportunities by holding instruments from different markets.