Correlation Between Zenith Steel and Samhi Hotels

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

By analyzing existing cross correlation between Zenith Steel Pipes and Samhi Hotels Limited, you can compare the effects of market volatilities on Zenith Steel and Samhi Hotels 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 Zenith Steel with a short position of Samhi Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zenith Steel and Samhi Hotels.

Diversification Opportunities for Zenith Steel and Samhi Hotels

0.83

Correlation Coefficient

Zenith Steel  Samhi Hotels

Very poor diversification

The 3 months correlation between Zenith and Samhi is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Zenith Steel Pipes and Samhi Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samhi Hotels Limited and Zenith 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 Zenith Steel Pipes are associated (or correlated) with Samhi Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samhi Hotels Limited has no effect on the direction of Zenith Steel i.e., Zenith Steel and Samhi Hotels go up and down completely randomly.

Pair Corralation between Zenith Steel and Samhi Hotels

Assuming the 90 days trading horizon Zenith Steel Pipes is expected to under-perform the Samhi Hotels. In addition to that, Zenith Steel is 1.02 times more volatile than Samhi Hotels Limited. It trades about -0.16 of its total potential returns per unit of risk. Samhi Hotels Limited is currently generating about -0.06 per unit of volatility. If you would invest  21,015  in Samhi Hotels Limited on September 12, 2024 and sell it today you would lose (1,811) from holding Samhi Hotels Limited or give up 8.62% of portfolio value over 90 days.

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

Zenith Steel Pipes  vs.  Samhi Hotels Limited

Zenith Steel Pipes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zenith Steel Pipes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Samhi Hotels Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samhi Hotels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary 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 Zenith Steel and Samhi Hotels

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

The idea behind Zenith Steel Pipes and Samhi Hotels Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.