Correlation Between Lucky Cement and Gul Ahmed

Can any of the company-specific risk be diversified away by investing in both Lucky Cement and Gul Ahmed 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 Lucky Cement and Gul Ahmed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lucky Cement and Gul Ahmed Textile, you can compare the effects of market volatilities on Lucky Cement and Gul Ahmed 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 Lucky Cement with a short position of Gul Ahmed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lucky Cement and Gul Ahmed.

Diversification Opportunities for Lucky Cement and Gul Ahmed

0.72

Correlation Coefficient

Lucky Cement  Gul Ahmed

Poor diversification

The 3 months correlation between Lucky and Gul is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Lucky Cement and Gul Ahmed Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gul Ahmed Textile and Lucky Cement 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 Lucky Cement are associated (or correlated) with Gul Ahmed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gul Ahmed Textile has no effect on the direction of Lucky Cement i.e., Lucky Cement and Gul Ahmed go up and down completely randomly.

Pair Corralation between Lucky Cement and Gul Ahmed

Assuming the 90 days trading horizon Lucky Cement is expected to generate 0.77 times more return on investment than Gul Ahmed. However, Lucky Cement is 1.3 times less risky than Gul Ahmed. It trades about 0.12 of its potential returns per unit of risk. Gul Ahmed Textile is currently generating about 0.03 per unit of risk. If you would invest  78,373  in Lucky Cement on September 12, 2024 and sell it today you would earn a total of  43,480  from holding Lucky Cement or generate 55.48% return on investment over 90 days.

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

Lucky Cement  vs.  Gul Ahmed Textile

Lucky Cement

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lucky Cement are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lucky Cement sustained solid returns over the last few months and may actually be approaching a breakup point.

Gul Ahmed Textile

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gul Ahmed Textile are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gul Ahmed sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lucky Cement and Gul Ahmed

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

The idea behind Lucky Cement and Gul Ahmed Textile 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.