Correlation Between Alfalah Consumer and Sindh Modaraba

Can any of the company-specific risk be diversified away by investing in both Alfalah Consumer and Sindh Modaraba 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 Alfalah Consumer and Sindh Modaraba into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alfalah Consumer and Sindh Modaraba Management, you can compare the effects of market volatilities on Alfalah Consumer and Sindh Modaraba 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 Alfalah Consumer with a short position of Sindh Modaraba. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfalah Consumer and Sindh Modaraba.

Diversification Opportunities for Alfalah Consumer and Sindh Modaraba

0.79

Correlation Coefficient

Alfalah Consumer  Sindh Modaraba

Poor diversification

The 3 months correlation between Alfalah and Sindh is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Alfalah Consumer and Sindh Modaraba Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sindh Modaraba Management and Alfalah Consumer 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 Alfalah Consumer are associated (or correlated) with Sindh Modaraba. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sindh Modaraba Management has no effect on the direction of Alfalah Consumer i.e., Alfalah Consumer and Sindh Modaraba go up and down completely randomly.

Pair Corralation between Alfalah Consumer and Sindh Modaraba

Assuming the 90 days trading horizon Alfalah Consumer is expected to generate 1.63 times more return on investment than Sindh Modaraba. However, Alfalah Consumer is 1.63 times more volatile than Sindh Modaraba Management. It trades about 0.19 of its potential returns per unit of risk. Sindh Modaraba Management is currently generating about -0.05 per unit of risk. If you would invest  1,347  in Alfalah Consumer on October 4, 2024 and sell it today you would earn a total of  156.00  from holding Alfalah Consumer or generate 11.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Alfalah Consumer  vs.  Sindh Modaraba Management

Alfalah Consumer

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alfalah Consumer are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Alfalah Consumer sustained solid returns over the last few months and may actually be approaching a breakup point.

Sindh Modaraba Management

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sindh Modaraba Management are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Sindh Modaraba may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Alfalah Consumer and Sindh Modaraba

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

The idea behind Alfalah Consumer and Sindh Modaraba Management 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 Global Correlations module to find global opportunities by holding instruments from different markets.