Correlation Between Ghani Chemical and Crescent Star

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

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

Diversification Opportunities for Ghani Chemical and Crescent Star

0.47

Correlation Coefficient

Ghani Chemical  Crescent Star

Very weak diversification

The 3 months correlation between Ghani and Crescent is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ghani Chemical Industries and Crescent Star Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Star Insurance and Ghani Chemical 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 Ghani Chemical Industries are associated (or correlated) with Crescent Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Star Insurance has no effect on the direction of Ghani Chemical i.e., Ghani Chemical and Crescent Star go up and down completely randomly.

Pair Corralation between Ghani Chemical and Crescent Star

Assuming the 90 days trading horizon Ghani Chemical Industries is expected to generate 1.57 times more return on investment than Crescent Star. However, Ghani Chemical is 1.57 times more volatile than Crescent Star Insurance. It trades about 0.02 of its potential returns per unit of risk. Crescent Star Insurance is currently generating about 0.01 per unit of risk. If you would invest  1,532  in Ghani Chemical Industries on October 11, 2024 and sell it today you would lose (11.00) from holding Ghani Chemical Industries or give up 0.72% of portfolio value over 90 days.

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

Ghani Chemical Industries  vs.  Crescent Star Insurance

Ghani Chemical Industries

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ghani Chemical Industries are ranked lower than 14 (%) 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.

Crescent Star Insurance

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Crescent Star Insurance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Crescent Star sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ghani Chemical and Crescent Star

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

The idea behind Ghani Chemical Industries and Crescent Star Insurance 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.