Correlation Between Ghani Chemical and Habib Insurance

Can any of the company-specific risk be diversified away by investing in both Ghani Chemical and Habib Insurance 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 Habib Insurance 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 Habib Insurance, you can compare the effects of market volatilities on Ghani Chemical and Habib Insurance 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 Habib Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ghani Chemical and Habib Insurance.

Diversification Opportunities for Ghani Chemical and Habib Insurance

0.31

Correlation Coefficient

Ghani Chemical  Habib Insurance

Weak diversification

The 3 months correlation between Ghani and Habib is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ghani Chemical Industries and Habib Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib 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 Habib Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Insurance has no effect on the direction of Ghani Chemical i.e., Ghani Chemical and Habib Insurance go up and down completely randomly.

Pair Corralation between Ghani Chemical and Habib Insurance

Assuming the 90 days trading horizon Ghani Chemical Industries is expected to generate 1.34 times more return on investment than Habib Insurance. However, Ghani Chemical is 1.34 times more volatile than Habib Insurance. It trades about 0.07 of its potential returns per unit of risk. Habib Insurance is currently generating about 0.07 per unit of risk. If you would invest  1,733  in Ghani Chemical Industries on December 30, 2024 and sell it today you would earn a total of  246.00  from holding Ghani Chemical Industries or generate 14.2% return on investment over 90 days.

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

Ghani Chemical Industries  vs.  Habib Insurance

Ghani Chemical Industries

Risk-Adjusted Performance

Modest

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

Habib Insurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Insurance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Habib Insurance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ghani Chemical and Habib Insurance

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

The idea behind Ghani Chemical Industries and Habib 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.