Correlation Between Stellar and Azad Engineering

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

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

Diversification Opportunities for Stellar and Azad Engineering

0.6

Correlation Coefficient

Stellar  Azad Engineering

Poor diversification

The 3 months correlation between Stellar and Azad is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Azad Engineering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azad Engineering and Stellar 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 Stellar are associated (or correlated) with Azad Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azad Engineering has no effect on the direction of Stellar i.e., Stellar and Azad Engineering go up and down completely randomly.

Pair Corralation between Stellar and Azad Engineering

Assuming the 90 days trading horizon Stellar is expected to generate 2.46 times more return on investment than Azad Engineering. However, Stellar is 2.46 times more volatile than Azad Engineering Limited. It trades about 0.09 of its potential returns per unit of risk. Azad Engineering Limited is currently generating about 0.01 per unit of risk. If you would invest  40.00  in Stellar on October 24, 2024 and sell it today you would earn a total of  4.00  from holding Stellar or generate 10.0% return on investment over 90 days.

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

Stellar  vs.  Azad Engineering Limited

Stellar

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Azad Engineering

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Azad Engineering Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Azad Engineering unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stellar and Azad Engineering

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

The idea behind Stellar and Azad Engineering 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..