Correlation Between ITTEFAQ Iron and Ghandhara Automobile

Can any of the company-specific risk be diversified away by investing in both ITTEFAQ Iron and Ghandhara Automobile 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 ITTEFAQ Iron and Ghandhara Automobile into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ITTEFAQ Iron Industries and Ghandhara Automobile, you can compare the effects of market volatilities on ITTEFAQ Iron and Ghandhara Automobile 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 ITTEFAQ Iron with a short position of Ghandhara Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITTEFAQ Iron and Ghandhara Automobile.

Diversification Opportunities for ITTEFAQ Iron and Ghandhara Automobile

0.9

Correlation Coefficient

ITTEFAQ Iron  Ghandhara Automobile

Almost no diversification

The 3 months correlation between ITTEFAQ and Ghandhara is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding ITTEFAQ Iron Industries and Ghandhara Automobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ghandhara Automobile and ITTEFAQ Iron 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 ITTEFAQ Iron Industries are associated (or correlated) with Ghandhara Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ghandhara Automobile has no effect on the direction of ITTEFAQ Iron i.e., ITTEFAQ Iron and Ghandhara Automobile go up and down completely randomly.

Pair Corralation between ITTEFAQ Iron and Ghandhara Automobile

Assuming the 90 days trading horizon ITTEFAQ Iron is expected to generate 1.75 times less return on investment than Ghandhara Automobile. But when comparing it to its historical volatility, ITTEFAQ Iron Industries is 1.75 times less risky than Ghandhara Automobile. It trades about 0.25 of its potential returns per unit of risk. Ghandhara Automobile is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  22,644  in Ghandhara Automobile on September 27, 2024 and sell it today you would earn a total of  5,103  from holding Ghandhara Automobile or generate 22.54% return on investment over 90 days.

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

ITTEFAQ Iron Industries  vs.  Ghandhara Automobile

ITTEFAQ Iron Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ITTEFAQ Iron Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, ITTEFAQ Iron reported solid returns over the last few months and may actually be approaching a breakup point.

Ghandhara Automobile

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ghandhara Automobile are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Ghandhara Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ITTEFAQ Iron and Ghandhara Automobile

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

The idea behind ITTEFAQ Iron Industries and Ghandhara Automobile 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.