Correlation Between Pakistan Synthetics and Crescent Steel

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

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

Diversification Opportunities for Pakistan Synthetics and Crescent Steel

0.02

Correlation Coefficient

Pakistan Synthetics  Crescent Steel

Significant diversification

The 3 months correlation between Pakistan and Crescent is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Synthetics and Crescent Steel Allied in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Steel Allied and Pakistan Synthetics 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 Pakistan Synthetics are associated (or correlated) with Crescent Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Steel Allied has no effect on the direction of Pakistan Synthetics i.e., Pakistan Synthetics and Crescent Steel go up and down completely randomly.

Pair Corralation between Pakistan Synthetics and Crescent Steel

Assuming the 90 days trading horizon Pakistan Synthetics is expected to generate 0.83 times more return on investment than Crescent Steel. However, Pakistan Synthetics is 1.2 times less risky than Crescent Steel. It trades about 0.2 of its potential returns per unit of risk. Crescent Steel Allied is currently generating about 0.1 per unit of risk. If you would invest  2,531  in Pakistan Synthetics on October 11, 2024 and sell it today you would earn a total of  1,469  from holding Pakistan Synthetics or generate 58.04% return on investment over 90 days.

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

Pakistan Synthetics  vs.  Crescent Steel Allied

Pakistan Synthetics

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Synthetics are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pakistan Synthetics sustained solid returns over the last few months and may actually be approaching a breakup point.

Crescent Steel Allied

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crescent Steel Allied are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Crescent Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pakistan Synthetics and Crescent Steel

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

The idea behind Pakistan Synthetics and Crescent Steel Allied 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.