Correlation Between Ghandhara Automobile and 786 Investment

Can any of the company-specific risk be diversified away by investing in both Ghandhara Automobile and 786 Investment 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 Ghandhara Automobile and 786 Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ghandhara Automobile and 786 Investment Limited, you can compare the effects of market volatilities on Ghandhara Automobile and 786 Investment 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 Ghandhara Automobile with a short position of 786 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ghandhara Automobile and 786 Investment.

Diversification Opportunities for Ghandhara Automobile and 786 Investment

0.76

Correlation Coefficient

Ghandhara Automobile  786 Investment

Poor diversification

The 3 months correlation between Ghandhara and 786 is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ghandhara Automobile and 786 Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 786 Investment and Ghandhara Automobile 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 Ghandhara Automobile are associated (or correlated) with 786 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 786 Investment has no effect on the direction of Ghandhara Automobile i.e., Ghandhara Automobile and 786 Investment go up and down completely randomly.

Pair Corralation between Ghandhara Automobile and 786 Investment

Assuming the 90 days trading horizon Ghandhara Automobile is expected to generate 0.86 times more return on investment than 786 Investment. However, Ghandhara Automobile is 1.16 times less risky than 786 Investment. It trades about 0.16 of its potential returns per unit of risk. 786 Investment Limited is currently generating about 0.06 per unit of risk. If you would invest  3,338  in Ghandhara Automobile on September 15, 2024 and sell it today you would earn a total of  25,631  from holding Ghandhara Automobile or generate 767.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	91.99%
Values	Daily Returns

Ghandhara Automobile  vs.  786 Investment Limited

Ghandhara Automobile

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ghandhara Automobile are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ghandhara Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

786 Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 786 Investment Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, 786 Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ghandhara Automobile and 786 Investment

The main advantage of trading using opposite Ghandhara Automobile and 786 Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ghandhara Automobile position performs unexpectedly, 786 Investment 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 786 Investment will offset losses from the drop in 786 Investment's long position.

The idea behind Ghandhara Automobile and 786 Investment 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.

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.