Correlation Between Sindh Modaraba and Nimir Industrial

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

Diversification Opportunities for Sindh Modaraba and Nimir Industrial

0.11

Correlation Coefficient

Sindh Modaraba  Nimir Industrial

Average diversification

The 3 months correlation between Sindh and Nimir is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Sindh Modaraba Management and Nimir Industrial Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nimir Industrial Chemical 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 Nimir Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nimir Industrial Chemical has no effect on the direction of Sindh Modaraba i.e., Sindh Modaraba and Nimir Industrial go up and down completely randomly.

Pair Corralation between Sindh Modaraba and Nimir Industrial

Assuming the 90 days trading horizon Sindh Modaraba Management is expected to generate 1.16 times more return on investment than Nimir Industrial. However, Sindh Modaraba is 1.16 times more volatile than Nimir Industrial Chemical. It trades about 0.04 of its potential returns per unit of risk. Nimir Industrial Chemical is currently generating about -0.01 per unit of risk. If you would invest  1,015  in Sindh Modaraba Management on December 30, 2024 and sell it today you would earn a total of  55.00  from holding Sindh Modaraba Management or generate 5.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Sindh Modaraba Management  vs.  Nimir Industrial Chemical

Sindh Modaraba Management

Risk-Adjusted Performance

Insignificant

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

Nimir Industrial Chemical

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sindh Modaraba and Nimir Industrial

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

The idea behind Sindh Modaraba Management and Nimir Industrial Chemical 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.