Correlation Between Shadab Textile and Al Khair

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

By analyzing existing cross correlation between Shadab Textile Mills and Al Khair Gadoon Limited, you can compare the effects of market volatilities on Shadab Textile and Al Khair 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 Shadab Textile with a short position of Al Khair. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shadab Textile and Al Khair.

Diversification Opportunities for Shadab Textile and Al Khair

-0.46

Correlation Coefficient

Shadab Textile  Al Khair

Very good diversification

The 3 months correlation between Shadab and AKGL is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Shadab Textile Mills and Al Khair Gadoon Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Khair Gadoon and Shadab Textile 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 Shadab Textile Mills are associated (or correlated) with Al Khair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Khair Gadoon has no effect on the direction of Shadab Textile i.e., Shadab Textile and Al Khair go up and down completely randomly.

Pair Corralation between Shadab Textile and Al Khair

Assuming the 90 days trading horizon Shadab Textile Mills is expected to generate 0.93 times more return on investment than Al Khair. However, Shadab Textile Mills is 1.08 times less risky than Al Khair. It trades about 0.04 of its potential returns per unit of risk. Al Khair Gadoon Limited is currently generating about -0.08 per unit of risk. If you would invest  2,159  in Shadab Textile Mills on December 23, 2024 and sell it today you would earn a total of  111.00  from holding Shadab Textile Mills or generate 5.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	75.81%
Values	Daily Returns

Shadab Textile Mills  vs.  Al Khair Gadoon Limited

Shadab Textile Mills

Risk-Adjusted Performance

Insignificant

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

Al Khair Gadoon

Risk-Adjusted Performance

Very Weak

Over the last 90 days Al Khair Gadoon Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shadab Textile and Al Khair

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

The idea behind Shadab Textile Mills and Al Khair Gadoon Limited 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.