Correlation Between Shifa International and Masood Textile

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

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

Diversification Opportunities for Shifa International and Masood Textile

0.39

Correlation Coefficient

Shifa International  Masood Textile

Weak diversification

The 3 months correlation between Shifa and Masood is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Shifa International Hospitals and Masood Textile Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masood Textile Mills and Shifa International 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 Shifa International Hospitals are associated (or correlated) with Masood Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masood Textile Mills has no effect on the direction of Shifa International i.e., Shifa International and Masood Textile go up and down completely randomly.

Pair Corralation between Shifa International and Masood Textile

Assuming the 90 days trading horizon Shifa International is expected to generate 2.27 times less return on investment than Masood Textile. But when comparing it to its historical volatility, Shifa International Hospitals is 1.47 times less risky than Masood Textile. It trades about 0.07 of its potential returns per unit of risk. Masood Textile Mills is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,151  in Masood Textile Mills on December 5, 2024 and sell it today you would earn a total of  404.00  from holding Masood Textile Mills or generate 7.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Shifa International Hospitals  vs.  Masood Textile Mills

Shifa International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shifa International Hospitals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shifa International sustained solid returns over the last few months and may actually be approaching a breakup point.

Masood Textile Mills

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Masood Textile Mills are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Masood Textile sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shifa International and Masood Textile

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

The idea behind Shifa International Hospitals and Masood Textile Mills 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .