Correlation Between Ittehad Chemicals and Al Khair

Can any of the company-specific risk be diversified away by investing in both Ittehad Chemicals and Al Khair 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 Ittehad Chemicals and Al Khair into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ittehad Chemicals and Al Khair Gadoon Limited, you can compare the effects of market volatilities on Ittehad Chemicals and Al Khair 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 Ittehad Chemicals with a short position of Al Khair. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ittehad Chemicals and Al Khair.

Diversification Opportunities for Ittehad Chemicals and Al Khair

0.56

Correlation Coefficient

Ittehad Chemicals  Al Khair

Very weak diversification

The 3 months correlation between Ittehad and AKGL is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ittehad Chemicals and Al Khair Gadoon Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Khair Gadoon and Ittehad Chemicals 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 Ittehad Chemicals are associated (or correlated) with Al Khair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Khair Gadoon has no effect on the direction of Ittehad Chemicals i.e., Ittehad Chemicals and Al Khair go up and down completely randomly.

Pair Corralation between Ittehad Chemicals and Al Khair

Assuming the 90 days trading horizon Ittehad Chemicals is expected to generate 0.55 times more return on investment than Al Khair. However, Ittehad Chemicals is 1.8 times less risky than Al Khair. It trades about 0.2 of its potential returns per unit of risk. Al Khair Gadoon Limited is currently generating about 0.08 per unit of risk. If you would invest  4,655  in Ittehad Chemicals on October 23, 2024 and sell it today you would earn a total of  2,445  from holding Ittehad Chemicals or generate 52.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	62.9%
Values	Daily Returns

Ittehad Chemicals  vs.  Al Khair Gadoon Limited

Ittehad Chemicals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ittehad Chemicals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ittehad Chemicals reported solid returns over the last few months and may actually be approaching a breakup point.

Al Khair Gadoon

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Al Khair Gadoon Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Al Khair sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ittehad Chemicals and Al Khair

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

The idea behind Ittehad Chemicals and Al Khair Gadoon Limited 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.

Check out your portfolio center.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.