Correlation Between Samba Bank and Agha Steel

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

By analyzing existing cross correlation between Samba Bank and Agha Steel Industries, you can compare the effects of market volatilities on Samba Bank and Agha Steel 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 Samba Bank with a short position of Agha Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samba Bank and Agha Steel.

Diversification Opportunities for Samba Bank and Agha Steel

0.23

Correlation Coefficient

Samba Bank  Agha Steel

Modest diversification

The 3 months correlation between Samba and Agha is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Samba Bank and Agha Steel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agha Steel Industries and Samba Bank 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 Samba Bank are associated (or correlated) with Agha Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agha Steel Industries has no effect on the direction of Samba Bank i.e., Samba Bank and Agha Steel go up and down completely randomly.

Pair Corralation between Samba Bank and Agha Steel

Assuming the 90 days trading horizon Samba Bank is expected to generate 1.0 times more return on investment than Agha Steel. However, Samba Bank is 1.0 times less risky than Agha Steel. It trades about 0.08 of its potential returns per unit of risk. Agha Steel Industries is currently generating about 0.07 per unit of risk. If you would invest  894.00  in Samba Bank on March 5, 2025 and sell it today you would earn a total of  56.00  from holding Samba Bank or generate 6.26% return on investment over 90 days.

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

Samba Bank  vs.  Agha Steel Industries

Samba Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Samba Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Samba Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Agha Steel Industries

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Samba Bank and Agha Steel

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

The idea behind Samba Bank and Agha Steel Industries 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.