Correlation Between Quice Food and Ghani Chemical

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

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

Diversification Opportunities for Quice Food and Ghani Chemical

0.74

Correlation Coefficient

Quice Food  Ghani Chemical

Poor diversification

The 3 months correlation between Quice and Ghani is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Quice Food Industries 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 Quice Food 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 Quice Food Industries 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 Quice Food i.e., Quice Food and Ghani Chemical go up and down completely randomly.

Pair Corralation between Quice Food and Ghani Chemical

Assuming the 90 days trading horizon Quice Food Industries is expected to generate 1.32 times more return on investment than Ghani Chemical. However, Quice Food is 1.32 times more volatile than Ghani Chemical Industries. It trades about 0.05 of its potential returns per unit of risk. Ghani Chemical Industries is currently generating about 0.04 per unit of risk. If you would invest  361.00  in Quice Food Industries on October 11, 2024 and sell it today you would earn a total of  280.00  from holding Quice Food Industries or generate 77.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.76%
Values	Daily Returns

Quice Food Industries  vs.  Ghani Chemical Industries

Quice Food Industries

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Quice Food Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Quice Food disclosed solid returns over the last few months and may actually be approaching a breakup point.

Ghani Chemical Industries

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ghani Chemical Industries are ranked lower than 14 (%) 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 Quice Food and Ghani Chemical

The main advantage of trading using opposite Quice Food and Ghani Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quice Food 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 Quice Food Industries 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.