Correlation Between Ghani Chemical and Unity Foods

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

Diversification Opportunities for Ghani Chemical and Unity Foods

-0.79

Correlation Coefficient

Ghani Chemical  Unity Foods

Pay attention - limited upside

The 3 months correlation between Ghani and Unity is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Ghani Chemical Industries and Unity Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unity Foods 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 Unity Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unity Foods has no effect on the direction of Ghani Chemical i.e., Ghani Chemical and Unity Foods go up and down completely randomly.

Pair Corralation between Ghani Chemical and Unity Foods

Assuming the 90 days trading horizon Ghani Chemical Industries is expected to generate 2.75 times more return on investment than Unity Foods. However, Ghani Chemical is 2.75 times more volatile than Unity Foods. It trades about 0.15 of its potential returns per unit of risk. Unity Foods is currently generating about -0.18 per unit of risk. If you would invest  1,425  in Ghani Chemical Industries on December 22, 2024 and sell it today you would earn a total of  581.00  from holding Ghani Chemical Industries or generate 40.77% return on investment over 90 days.

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

Ghani Chemical Industries  vs.  Unity Foods

Ghani Chemical Industries

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ghani Chemical Industries are ranked lower than 11 (%) 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.

Unity Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Unity Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Ghani Chemical and Unity Foods

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

The idea behind Ghani Chemical Industries and Unity 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.

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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.