Correlation Between Nishat Mills and Indus

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

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

Diversification Opportunities for Nishat Mills and Indus

-0.03

Correlation Coefficient

Nishat Mills  Indus

Good diversification

The 3 months correlation between Nishat and Indus is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Nishat Mills and Indus Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indus Motor and Nishat Mills 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 Nishat Mills are associated (or correlated) with Indus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indus Motor has no effect on the direction of Nishat Mills i.e., Nishat Mills and Indus go up and down completely randomly.

Pair Corralation between Nishat Mills and Indus

Assuming the 90 days trading horizon Nishat Mills is expected to generate 2.26 times more return on investment than Indus. However, Nishat Mills is 2.26 times more volatile than Indus Motor. It trades about 0.05 of its potential returns per unit of risk. Indus Motor is currently generating about -0.03 per unit of risk. If you would invest  10,473  in Nishat Mills on December 30, 2024 and sell it today you would earn a total of  548.00  from holding Nishat Mills or generate 5.23% return on investment over 90 days.

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

Nishat Mills  vs.  Indus Motor

Nishat Mills

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nishat Mills are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Nishat Mills may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Indus Motor

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Nishat Mills and Indus

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

The idea behind Nishat Mills and Indus Motor 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.