Correlation Between Samhi Hotels and SAL Steel

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

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

Diversification Opportunities for Samhi Hotels and SAL Steel

0.54

Correlation Coefficient

Samhi Hotels  SAL Steel

Very weak diversification

The 3 months correlation between Samhi and SAL is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Samhi Hotels Limited and SAL Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAL Steel Limited and Samhi Hotels 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 Samhi Hotels Limited are associated (or correlated) with SAL Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAL Steel Limited has no effect on the direction of Samhi Hotels i.e., Samhi Hotels and SAL Steel go up and down completely randomly.

Pair Corralation between Samhi Hotels and SAL Steel

Assuming the 90 days trading horizon Samhi Hotels Limited is expected to generate 0.82 times more return on investment than SAL Steel. However, Samhi Hotels Limited is 1.23 times less risky than SAL Steel. It trades about 0.04 of its potential returns per unit of risk. SAL Steel Limited is currently generating about -0.05 per unit of risk. If you would invest  18,908  in Samhi Hotels Limited on September 12, 2024 and sell it today you would earn a total of  296.00  from holding Samhi Hotels Limited or generate 1.57% return on investment over 90 days.

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

Samhi Hotels Limited  vs.  SAL Steel Limited

Samhi Hotels Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samhi Hotels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

SAL Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAL Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, SAL Steel is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Samhi Hotels and SAL Steel

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

The idea behind Samhi Hotels Limited and SAL Steel Limited 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.