Correlation Between Habib Sugar and Pakistan Aluminium

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

Diversification Opportunities for Habib Sugar and Pakistan Aluminium

0.79

Correlation Coefficient

Habib Sugar  Pakistan Aluminium

Poor diversification

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

Pair Corralation between Habib Sugar and Pakistan Aluminium

Assuming the 90 days trading horizon Habib Sugar is expected to generate 2.71 times less return on investment than Pakistan Aluminium. But when comparing it to its historical volatility, Habib Sugar Mills is 1.47 times less risky than Pakistan Aluminium. It trades about 0.08 of its potential returns per unit of risk. Pakistan Aluminium Beverage is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  8,600  in Pakistan Aluminium Beverage on October 26, 2024 and sell it today you would earn a total of  2,704  from holding Pakistan Aluminium Beverage or generate 31.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Habib Sugar Mills  vs.  Pakistan Aluminium Beverage

Habib Sugar Mills

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Sugar Mills are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Habib Sugar may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pakistan Aluminium

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Aluminium Beverage are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pakistan Aluminium sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Habib Sugar and Pakistan Aluminium

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

The idea behind Habib Sugar Mills and Pakistan Aluminium Beverage 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.