Correlation Between Amreli Steels and Shifa International

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

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

Diversification Opportunities for Amreli Steels and Shifa International

-0.08

Correlation Coefficient

Amreli Steels  Shifa International

Good diversification

The 3 months correlation between Amreli and Shifa is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Amreli Steels and Shifa International Hospitals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shifa International and Amreli Steels 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 Amreli Steels are associated (or correlated) with Shifa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shifa International has no effect on the direction of Amreli Steels i.e., Amreli Steels and Shifa International go up and down completely randomly.

Pair Corralation between Amreli Steels and Shifa International

Assuming the 90 days trading horizon Amreli Steels is expected to under-perform the Shifa International. But the stock apears to be less risky and, when comparing its historical volatility, Amreli Steels is 1.26 times less risky than Shifa International. The stock trades about 0.0 of its potential returns per unit of risk. The Shifa International Hospitals is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  13,235  in Shifa International Hospitals on September 4, 2024 and sell it today you would earn a total of  26,806  from holding Shifa International Hospitals or generate 202.54% return on investment over 90 days.

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

Amreli Steels  vs.  Shifa International Hospitals

Amreli Steels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amreli Steels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Amreli Steels is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shifa International

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Shifa International Hospitals are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shifa International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amreli Steels and Shifa International

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

The idea behind Amreli Steels and Shifa International Hospitals 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.