Correlation Between Pak Gulf and Thatta Cement

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

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

Diversification Opportunities for Pak Gulf and Thatta Cement

0.79

Correlation Coefficient

Pak Gulf  Thatta Cement

Poor diversification

The 3 months correlation between Pak and Thatta is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Pak Gulf Leasing and Thatta Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thatta Cement and Pak Gulf 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 Pak Gulf Leasing 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 Pak Gulf i.e., Pak Gulf and Thatta Cement go up and down completely randomly.

Pair Corralation between Pak Gulf and Thatta Cement

Assuming the 90 days trading horizon Pak Gulf is expected to generate 2.68 times less return on investment than Thatta Cement. But when comparing it to its historical volatility, Pak Gulf Leasing is 1.1 times less risky than Thatta Cement. It trades about 0.17 of its potential returns per unit of risk. Thatta Cement is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  5,190  in Thatta Cement on September 16, 2024 and sell it today you would earn a total of  14,430  from holding Thatta Cement or generate 278.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.92%
Values	Daily Returns

Pak Gulf Leasing  vs.  Thatta Cement

Pak Gulf Leasing

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pak Gulf Leasing are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pak Gulf sustained solid returns over the last few months and may actually be approaching a breakup point.

Thatta Cement

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Thatta Cement are ranked lower than 32 (%) 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 Pak Gulf and Thatta Cement

The main advantage of trading using opposite Pak Gulf and Thatta Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pak Gulf 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 Pak Gulf Leasing 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.