Correlation Between Sindh Modaraba and Mari Petroleum

Can any of the company-specific risk be diversified away by investing in both Sindh Modaraba and Mari Petroleum 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 Mari Petroleum 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 Mari Petroleum, you can compare the effects of market volatilities on Sindh Modaraba and Mari Petroleum 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 Mari Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sindh Modaraba and Mari Petroleum.

Diversification Opportunities for Sindh Modaraba and Mari Petroleum

-0.31

Correlation Coefficient

Sindh Modaraba  Mari Petroleum

Very good diversification

The 3 months correlation between Sindh and Mari is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sindh Modaraba Management and Mari Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mari Petroleum 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 Mari Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mari Petroleum has no effect on the direction of Sindh Modaraba i.e., Sindh Modaraba and Mari Petroleum go up and down completely randomly.

Pair Corralation between Sindh Modaraba and Mari Petroleum

Assuming the 90 days trading horizon Sindh Modaraba Management is expected to generate 0.9 times more return on investment than Mari Petroleum. However, Sindh Modaraba Management is 1.12 times less risky than Mari Petroleum. It trades about 0.07 of its potential returns per unit of risk. Mari Petroleum is currently generating about 0.0 per unit of risk. If you would invest  991.00  in Sindh Modaraba Management on December 23, 2024 and sell it today you would earn a total of  104.00  from holding Sindh Modaraba Management or generate 10.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.06%
Values	Daily Returns

Sindh Modaraba Management  vs.  Mari Petroleum

Sindh Modaraba Management

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sindh Modaraba Management are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Sindh Modaraba disclosed solid returns over the last few months and may actually be approaching a breakup point.

Mari Petroleum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mari Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Mari Petroleum is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sindh Modaraba and Mari Petroleum

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

The idea behind Sindh Modaraba Management and Mari Petroleum 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.