Correlation Between Sindh Modaraba and Shifa International

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

Diversification Opportunities for Sindh Modaraba and Shifa International

0.48

Correlation Coefficient

Sindh Modaraba  Shifa International

Very weak diversification

The 3 months correlation between Sindh and Shifa is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Sindh Modaraba Management and Shifa International Hospitals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shifa International 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 Shifa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shifa International has no effect on the direction of Sindh Modaraba i.e., Sindh Modaraba and Shifa International go up and down completely randomly.

Pair Corralation between Sindh Modaraba and Shifa International

Assuming the 90 days trading horizon Sindh Modaraba is expected to generate 1.45 times less return on investment than Shifa International. But when comparing it to its historical volatility, Sindh Modaraba Management is 1.66 times less risky than Shifa International. It trades about 0.05 of its potential returns per unit of risk. Shifa International Hospitals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  39,892  in Shifa International Hospitals on October 23, 2024 and sell it today you would earn a total of  689.00  from holding Shifa International Hospitals or generate 1.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	84.21%
Values	Daily Returns

Sindh Modaraba Management  vs.  Shifa International Hospitals

Sindh Modaraba Management

Risk-Adjusted Performance

5 of 100

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 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shifa International

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shifa International Hospitals are ranked lower than 17 (%) 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.

Pair Trading with Sindh Modaraba and Shifa International

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

The idea behind Sindh Modaraba Management and Shifa International Hospitals 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.