Correlation Between Nimir Industrial and Murree Brewery

Can any of the company-specific risk be diversified away by investing in both Nimir Industrial and Murree Brewery 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 Nimir Industrial and Murree Brewery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nimir Industrial Chemical and Murree Brewery, you can compare the effects of market volatilities on Nimir Industrial and Murree Brewery 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 Nimir Industrial with a short position of Murree Brewery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nimir Industrial and Murree Brewery.

Diversification Opportunities for Nimir Industrial and Murree Brewery

0.06

Correlation Coefficient

Nimir Industrial  Murree Brewery

Significant diversification

The 3 months correlation between Nimir and Murree is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Nimir Industrial Chemical and Murree Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murree Brewery and Nimir Industrial 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 Nimir Industrial Chemical are associated (or correlated) with Murree Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murree Brewery has no effect on the direction of Nimir Industrial i.e., Nimir Industrial and Murree Brewery go up and down completely randomly.

Pair Corralation between Nimir Industrial and Murree Brewery

Assuming the 90 days trading horizon Nimir Industrial Chemical is expected to under-perform the Murree Brewery. In addition to that, Nimir Industrial is 1.62 times more volatile than Murree Brewery. It trades about -0.01 of its total potential returns per unit of risk. Murree Brewery is currently generating about 0.05 per unit of volatility. If you would invest  70,959  in Murree Brewery on December 30, 2024 and sell it today you would earn a total of  2,767  from holding Murree Brewery or generate 3.9% return on investment over 90 days.

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

Nimir Industrial Chemical  vs.  Murree Brewery

Nimir Industrial Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nimir Industrial Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nimir Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Murree Brewery

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Murree Brewery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Murree Brewery is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Nimir Industrial and Murree Brewery

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

The idea behind Nimir Industrial Chemical and Murree Brewery 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.