Correlation Between Millat Tractors and Beco Steel

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

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

Diversification Opportunities for Millat Tractors and Beco Steel

0.82

Correlation Coefficient

Millat Tractors  Beco Steel

Very poor diversification

The 3 months correlation between Millat and Beco is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Millat Tractors and Beco Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beco Steel 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 Beco Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beco Steel has no effect on the direction of Millat Tractors i.e., Millat Tractors and Beco Steel go up and down completely randomly.

Pair Corralation between Millat Tractors and Beco Steel

Assuming the 90 days trading horizon Millat Tractors is expected to generate 0.63 times more return on investment than Beco Steel. However, Millat Tractors is 1.58 times less risky than Beco Steel. It trades about 0.1 of its potential returns per unit of risk. Beco Steel is currently generating about 0.01 per unit of risk. If you would invest  31,652  in Millat Tractors on October 5, 2024 and sell it today you would earn a total of  40,629  from holding Millat Tractors or generate 128.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.37%
Values	Daily Returns

Millat Tractors  vs.  Beco Steel

Millat Tractors

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Millat Tractors are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Millat Tractors reported solid returns over the last few months and may actually be approaching a breakup point.

Beco Steel

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beco Steel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beco Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Millat Tractors and Beco Steel

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

The idea behind Millat Tractors and Beco Steel 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.