Correlation Between Ghandhara Automobile and Big Bird

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

By analyzing existing cross correlation between Ghandhara Automobile and Big Bird Foods, you can compare the effects of market volatilities on Ghandhara Automobile and Big Bird 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 Big Bird. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ghandhara Automobile and Big Bird.

Diversification Opportunities for Ghandhara Automobile and Big Bird

-0.64

Correlation Coefficient

Ghandhara Automobile  Big Bird

Excellent diversification

The 3 months correlation between Ghandhara and Big is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ghandhara Automobile and Big Bird Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Bird Foods 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 Big Bird. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Bird Foods has no effect on the direction of Ghandhara Automobile i.e., Ghandhara Automobile and Big Bird go up and down completely randomly.

Pair Corralation between Ghandhara Automobile and Big Bird

Assuming the 90 days trading horizon Ghandhara Automobile is expected to generate 1.01 times more return on investment than Big Bird. However, Ghandhara Automobile is 1.01 times more volatile than Big Bird Foods. It trades about 0.26 of its potential returns per unit of risk. Big Bird Foods is currently generating about -0.03 per unit of risk. If you would invest  28,712  in Ghandhara Automobile on December 30, 2024 and sell it today you would earn a total of  19,859  from holding Ghandhara Automobile or generate 69.17% return on investment over 90 days.

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

Ghandhara Automobile  vs.  Big Bird Foods

Ghandhara Automobile

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ghandhara Automobile are ranked lower than 20 (%) 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.

Big Bird Foods

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Ghandhara Automobile and Big Bird

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

The idea behind Ghandhara Automobile and Big Bird Foods 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.