Correlation Between Packages and Ghani Chemical

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

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

Diversification Opportunities for Packages and Ghani Chemical

0.67

Correlation Coefficient

Packages  Ghani Chemical

Poor diversification

The 3 months correlation between Packages and Ghani is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Packages and Ghani Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ghani Chemical Industries and Packages 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 Packages are associated (or correlated) with Ghani Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ghani Chemical Industries has no effect on the direction of Packages i.e., Packages and Ghani Chemical go up and down completely randomly.

Pair Corralation between Packages and Ghani Chemical

Assuming the 90 days trading horizon Packages is expected to generate 2.98 times less return on investment than Ghani Chemical. But when comparing it to its historical volatility, Packages is 1.57 times less risky than Ghani Chemical. It trades about 0.09 of its potential returns per unit of risk. Ghani Chemical Industries is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,107  in Ghani Chemical Industries on October 24, 2024 and sell it today you would earn a total of  564.00  from holding Ghani Chemical Industries or generate 50.95% return on investment over 90 days.

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

Packages  vs.  Ghani Chemical Industries

Packages

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Packages are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Packages sustained solid returns over the last few months and may actually be approaching a breakup point.

Ghani Chemical Industries

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Packages and Ghani Chemical

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

The idea behind Packages and Ghani Chemical Industries 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.