Correlation Between Masood Textile and Millat Tractors

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

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

Diversification Opportunities for Masood Textile and Millat Tractors

-0.33

Correlation Coefficient

Masood Textile  Millat Tractors

Very good diversification

The 3 months correlation between Masood and Millat is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Masood Textile Mills and Millat Tractors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Millat Tractors and Masood Textile 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 Masood Textile Mills are associated (or correlated) with Millat Tractors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Millat Tractors has no effect on the direction of Masood Textile i.e., Masood Textile and Millat Tractors go up and down completely randomly.

Pair Corralation between Masood Textile and Millat Tractors

Assuming the 90 days trading horizon Masood Textile Mills is expected to under-perform the Millat Tractors. In addition to that, Masood Textile is 2.62 times more volatile than Millat Tractors. It trades about -0.01 of its total potential returns per unit of risk. Millat Tractors is currently generating about 0.0 per unit of volatility. If you would invest  59,429  in Millat Tractors on September 5, 2024 and sell it today you would lose (364.00) from holding Millat Tractors or give up 0.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	71.88%
Values	Daily Returns

Masood Textile Mills  vs.  Millat Tractors

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 somewhat strong basic indicators, Masood Textile is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Millat Tractors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Millat Tractors has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Millat Tractors is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Masood Textile and Millat Tractors

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

The idea behind Masood Textile Mills and Millat Tractors 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.