Correlation Between Gatron Industries and Habib Sugar

Can any of the company-specific risk be diversified away by investing in both Gatron Industries and Habib Sugar 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 Gatron Industries and Habib Sugar into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Gatron Industries and Habib Sugar

-0.32

Correlation Coefficient

Gatron Industries  Habib Sugar

Very good diversification

The 3 months correlation between Gatron and Habib is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Gatron Industries and Habib Sugar Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Sugar Mills and Gatron Industries 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 Gatron Industries are associated (or correlated) with Habib Sugar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Sugar Mills has no effect on the direction of Gatron Industries i.e., Gatron Industries and Habib Sugar go up and down completely randomly.

Pair Corralation between Gatron Industries and Habib Sugar

Assuming the 90 days trading horizon Gatron Industries is expected to under-perform the Habib Sugar. But the stock apears to be less risky and, when comparing its historical volatility, Gatron Industries is 1.11 times less risky than Habib Sugar. The stock trades about -0.09 of its potential returns per unit of risk. The Habib Sugar Mills is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,301  in Habib Sugar Mills on September 29, 2024 and sell it today you would earn a total of  2,125  from holding Habib Sugar Mills or generate 33.72% return on investment over 90 days.

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

Gatron Industries  vs.  Habib Sugar Mills

Gatron Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gatron Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Habib Sugar Mills

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Sugar Mills are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Habib Sugar disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gatron Industries and Habib Sugar

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

The idea behind Gatron Industries and Habib Sugar Mills 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.