Correlation Between Sindh Modaraba and K Electric

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

By analyzing existing cross correlation between Sindh Modaraba Management and K Electric, you can compare the effects of market volatilities on Sindh Modaraba and K Electric 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 Sindh Modaraba with a short position of K Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sindh Modaraba and K Electric.

Diversification Opportunities for Sindh Modaraba and K Electric

-0.3

Correlation Coefficient

Sindh Modaraba  K Electric

Very good diversification

The 3 months correlation between Sindh and KEL is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sindh Modaraba Management and K Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K Electric and Sindh Modaraba 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 Sindh Modaraba Management are associated (or correlated) with K Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K Electric has no effect on the direction of Sindh Modaraba i.e., Sindh Modaraba and K Electric go up and down completely randomly.

Pair Corralation between Sindh Modaraba and K Electric

Assuming the 90 days trading horizon Sindh Modaraba Management is expected to generate 0.75 times more return on investment than K Electric. However, Sindh Modaraba Management is 1.33 times less risky than K Electric. It trades about 0.02 of its potential returns per unit of risk. K Electric is currently generating about -0.1 per unit of risk. If you would invest  1,024  in Sindh Modaraba Management on December 2, 2024 and sell it today you would earn a total of  6.00  from holding Sindh Modaraba Management or generate 0.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Sindh Modaraba Management  vs.  K Electric

Sindh Modaraba Management

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sindh Modaraba Management are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Sindh Modaraba is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

K Electric

Risk-Adjusted Performance

Very Weak

Over the last 90 days K Electric has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Sindh Modaraba and K Electric

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

The idea behind Sindh Modaraba Management and K Electric 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 Transaction History module to view history of all your transactions and understand their impact on performance.