Correlation Between Roshan Packages and International Steels

Can any of the company-specific risk be diversified away by investing in both Roshan Packages and International Steels 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 Roshan Packages and International Steels into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Roshan Packages and International Steels

0.56

Correlation Coefficient

Roshan Packages  International Steels

Very weak diversification

The 3 months correlation between Roshan and International is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Roshan Packages and International Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Steels and Roshan Packages 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 Roshan Packages are associated (or correlated) with International Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Steels has no effect on the direction of Roshan Packages i.e., Roshan Packages and International Steels go up and down completely randomly.

Pair Corralation between Roshan Packages and International Steels

Assuming the 90 days trading horizon Roshan Packages is expected to under-perform the International Steels. But the stock apears to be less risky and, when comparing its historical volatility, Roshan Packages is 1.1 times less risky than International Steels. The stock trades about -0.09 of its potential returns per unit of risk. The International Steels is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  8,604  in International Steels on October 25, 2024 and sell it today you would earn a total of  571.00  from holding International Steels or generate 6.64% return on investment over 90 days.

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

Roshan Packages  vs.  International Steels

Roshan Packages

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Roshan Packages are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Roshan Packages reported solid returns over the last few months and may actually be approaching a breakup point.

International Steels

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Steels are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, International Steels reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Roshan Packages and International Steels

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

The idea behind Roshan Packages and International Steels 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.

Check out your portfolio center.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.