Correlation Between Habib Sugar and Bawany Air

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

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

Diversification Opportunities for Habib Sugar and Bawany Air

0.6

Correlation Coefficient

Habib Sugar  Bawany Air

Poor diversification

The 3 months correlation between Habib and Bawany is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Habib Sugar Mills and Bawany Air Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bawany Air Products and Habib Sugar 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 Habib Sugar Mills are associated (or correlated) with Bawany Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bawany Air Products has no effect on the direction of Habib Sugar i.e., Habib Sugar and Bawany Air go up and down completely randomly.

Pair Corralation between Habib Sugar and Bawany Air

Assuming the 90 days trading horizon Habib Sugar Mills is expected to under-perform the Bawany Air. But the stock apears to be less risky and, when comparing its historical volatility, Habib Sugar Mills is 1.78 times less risky than Bawany Air. The stock trades about -0.25 of its potential returns per unit of risk. The Bawany Air Products is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,416  in Bawany Air Products on October 6, 2024 and sell it today you would earn a total of  378.00  from holding Bawany Air Products or generate 11.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Habib Sugar Mills  vs.  Bawany Air Products

Habib Sugar Mills

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Sugar Mills are ranked lower than 10 (%) 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.

Bawany Air Products

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bawany Air Products are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bawany Air sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Habib Sugar and Bawany Air

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

The idea behind Habib Sugar Mills and Bawany Air Products 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.