Correlation Between Al Khair and Ghani Chemical

Can any of the company-specific risk be diversified away by investing in both Al Khair and Ghani Chemical 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 Al Khair and Ghani Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Al Khair Gadoon Limited and Ghani Chemical Industries, you can compare the effects of market volatilities on Al Khair and Ghani Chemical 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 Al Khair with a short position of Ghani Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Al Khair and Ghani Chemical.

Diversification Opportunities for Al Khair and Ghani Chemical

0.45

Correlation Coefficient

Al Khair  Ghani Chemical

Very weak diversification

The 3 months correlation between AKGL and Ghani is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Al Khair Gadoon Limited and Ghani Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ghani Chemical Industries and Al Khair 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 Al Khair Gadoon Limited are associated (or correlated) with Ghani Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ghani Chemical Industries has no effect on the direction of Al Khair i.e., Al Khair and Ghani Chemical go up and down completely randomly.

Pair Corralation between Al Khair and Ghani Chemical

Assuming the 90 days trading horizon Al Khair Gadoon Limited is expected to under-perform the Ghani Chemical. In addition to that, Al Khair is 1.15 times more volatile than Ghani Chemical Industries. It trades about -0.2 of its total potential returns per unit of risk. Ghani Chemical Industries is currently generating about 0.15 per unit of volatility. If you would invest  1,466  in Ghani Chemical Industries on October 22, 2024 and sell it today you would earn a total of  192.00  from holding Ghani Chemical Industries or generate 13.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Al Khair Gadoon Limited  vs.  Ghani Chemical Industries

Al Khair Gadoon

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Al Khair Gadoon Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Al Khair sustained solid returns over the last few months and may actually be approaching a breakup point.

Ghani Chemical Industries

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ghani Chemical Industries are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ghani Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Al Khair and Ghani Chemical

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

The idea behind Al Khair Gadoon Limited and Ghani Chemical 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.