Correlation Between Agha Steel and Arctic Textile

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

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

Diversification Opportunities for Agha Steel and Arctic Textile

0.25

Correlation Coefficient

Agha Steel  Arctic Textile

Modest diversification

The 3 months correlation between Agha and Arctic is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Agha Steel Industries and Arctic Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arctic Textile and Agha Steel 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 Agha Steel Industries are associated (or correlated) with Arctic Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arctic Textile has no effect on the direction of Agha Steel i.e., Agha Steel and Arctic Textile go up and down completely randomly.

Pair Corralation between Agha Steel and Arctic Textile

Assuming the 90 days trading horizon Agha Steel Industries is expected to under-perform the Arctic Textile. But the stock apears to be less risky and, when comparing its historical volatility, Agha Steel Industries is 1.33 times less risky than Arctic Textile. The stock trades about -0.13 of its potential returns per unit of risk. The Arctic Textile is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  2,490  in Arctic Textile on September 12, 2024 and sell it today you would lose (570.00) from holding Arctic Textile or give up 22.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.94%
Values	Daily Returns

Agha Steel Industries  vs.  Arctic Textile

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Arctic Textile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arctic Textile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Agha Steel and Arctic Textile

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

The idea behind Agha Steel Industries and Arctic Textile 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..