Correlation Between National Bank and Thatta Cement

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

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

Diversification Opportunities for National Bank and Thatta Cement

-0.32

Correlation Coefficient

National Bank  Thatta Cement

Very good diversification

The 3 months correlation between National and Thatta is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Thatta Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thatta Cement and National Bank 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 National Bank of are associated (or correlated) with Thatta Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thatta Cement has no effect on the direction of National Bank i.e., National Bank and Thatta Cement go up and down completely randomly.

Pair Corralation between National Bank and Thatta Cement

Assuming the 90 days trading horizon National Bank is expected to generate 1.55 times less return on investment than Thatta Cement. But when comparing it to its historical volatility, National Bank of is 1.26 times less risky than Thatta Cement. It trades about 0.06 of its potential returns per unit of risk. Thatta Cement is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  16,550  in Thatta Cement on December 2, 2024 and sell it today you would earn a total of  2,265  from holding Thatta Cement or generate 13.69% return on investment over 90 days.

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

National Bank of  vs.  Thatta Cement

National Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, National Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Thatta Cement

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thatta Cement are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Thatta Cement disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Bank and Thatta Cement

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

The idea behind National Bank of and Thatta Cement 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.