Correlation Between National Bank and Agha Steel

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

By analyzing existing cross correlation between National Bank of and Agha Steel Industries, you can compare the effects of market volatilities on National Bank and Agha 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 National Bank with a short position of Agha Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Agha Steel.

Diversification Opportunities for National Bank and Agha Steel

0.01

Correlation Coefficient

National Bank  Agha Steel

Significant diversification

The 3 months correlation between National and Agha is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Agha Steel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agha Steel Industries and National Bank 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 National Bank of are associated (or correlated) with Agha Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agha Steel Industries has no effect on the direction of National Bank i.e., National Bank and Agha Steel go up and down completely randomly.

Pair Corralation between National Bank and Agha Steel

Assuming the 90 days trading horizon National Bank of is expected to generate 0.86 times more return on investment than Agha Steel. However, National Bank of is 1.17 times less risky than Agha Steel. It trades about 0.09 of its potential returns per unit of risk. Agha Steel Industries is currently generating about -0.01 per unit of risk. If you would invest  2,418  in National Bank of on September 29, 2024 and sell it today you would earn a total of  3,551  from holding National Bank of or generate 146.86% return on investment over 90 days.

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

National Bank of  vs.  Agha Steel Industries

National Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, National Bank is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Agha Steel Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agha Steel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with National Bank and Agha Steel

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

The idea behind National Bank of and Agha Steel Industries 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 Stocks Directory module to find actively traded stocks across global markets.