Correlation Between MST Investment and Damsan JSC

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

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

Diversification Opportunities for MST Investment and Damsan JSC

-0.44

Correlation Coefficient

MST Investment  Damsan JSC

Very good diversification

The 3 months correlation between MST and Damsan is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding MST Investment JSC and Damsan JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Damsan JSC and MST Investment 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 MST Investment JSC are associated (or correlated) with Damsan JSC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Damsan JSC has no effect on the direction of MST Investment i.e., MST Investment and Damsan JSC go up and down completely randomly.

Pair Corralation between MST Investment and Damsan JSC

Assuming the 90 days trading horizon MST Investment JSC is expected to generate 2.03 times more return on investment than Damsan JSC. However, MST Investment is 2.03 times more volatile than Damsan JSC. It trades about 0.35 of its potential returns per unit of risk. Damsan JSC is currently generating about 0.08 per unit of risk. If you would invest  530,000  in MST Investment JSC on September 16, 2024 and sell it today you would earn a total of  140,000  from holding MST Investment JSC or generate 26.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

MST Investment JSC  vs.  Damsan JSC

MST Investment JSC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MST Investment JSC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, MST Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Damsan JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Damsan JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with MST Investment and Damsan JSC

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

The idea behind MST Investment JSC and Damsan JSC 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.