Correlation Between JS Investments and Masood Textile

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

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

Diversification Opportunities for JS Investments and Masood Textile

-0.46

Correlation Coefficient

JS Investments  Masood Textile

Very good diversification

The 3 months correlation between JSIL and Masood is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding JS Investments and Masood Textile Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masood Textile Mills and JS Investments 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 JS Investments are associated (or correlated) with Masood Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masood Textile Mills has no effect on the direction of JS Investments i.e., JS Investments and Masood Textile go up and down completely randomly.

Pair Corralation between JS Investments and Masood Textile

Assuming the 90 days trading horizon JS Investments is expected to generate 1.77 times less return on investment than Masood Textile. But when comparing it to its historical volatility, JS Investments is 1.05 times less risky than Masood Textile. It trades about 0.15 of its potential returns per unit of risk. Masood Textile Mills is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  4,170  in Masood Textile Mills on August 31, 2024 and sell it today you would earn a total of  630.00  from holding Masood Textile Mills or generate 15.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	77.27%
Values	Daily Returns

JS Investments  vs.  Masood Textile Mills

JS Investments

Risk-Adjusted Performance

12 of 100

Good

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

Masood Textile Mills

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Masood Textile Mills 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with JS Investments and Masood Textile

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

The idea behind JS Investments and Masood Textile Mills 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.