Correlation Between Roshan Packages and Hub Power

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

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

Diversification Opportunities for Roshan Packages and Hub Power

0.61

Correlation Coefficient

Roshan Packages  Hub Power

Poor diversification

The 3 months correlation between Roshan and Hub is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Roshan Packages and Hub Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hub Power and Roshan 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 Roshan Packages are associated (or correlated) with Hub Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hub Power has no effect on the direction of Roshan Packages i.e., Roshan Packages and Hub Power go up and down completely randomly.

Pair Corralation between Roshan Packages and Hub Power

Assuming the 90 days trading horizon Roshan Packages is expected to under-perform the Hub Power. But the stock apears to be less risky and, when comparing its historical volatility, Roshan Packages is 1.1 times less risky than Hub Power. The stock trades about -0.02 of its potential returns per unit of risk. The Hub Power is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  12,056  in Hub Power on October 8, 2024 and sell it today you would earn a total of  1,053  from holding Hub Power or generate 8.73% return on investment over 90 days.

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

Roshan Packages  vs.  Hub Power

Roshan Packages

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Roshan Packages are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Roshan Packages reported solid returns over the last few months and may actually be approaching a breakup point.

Hub Power

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Roshan Packages and Hub Power

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

The idea behind Roshan Packages and Hub Power 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 CEOs Directory module to screen CEOs from public companies around the world.