Correlation Between Tariq CorpPref and Shadab Textile

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

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

Diversification Opportunities for Tariq CorpPref and Shadab Textile

-0.28

Correlation Coefficient

Tariq CorpPref  Shadab Textile

Very good diversification

The 3 months correlation between Tariq and Shadab is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Tariq CorpPref and Shadab Textile Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shadab Textile Mills and Tariq CorpPref 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 Tariq CorpPref are associated (or correlated) with Shadab Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shadab Textile Mills has no effect on the direction of Tariq CorpPref i.e., Tariq CorpPref and Shadab Textile go up and down completely randomly.

Pair Corralation between Tariq CorpPref and Shadab Textile

Assuming the 90 days trading horizon Tariq CorpPref is expected to generate 1.03 times more return on investment than Shadab Textile. However, Tariq CorpPref is 1.03 times more volatile than Shadab Textile Mills. It trades about 0.18 of its potential returns per unit of risk. Shadab Textile Mills is currently generating about 0.13 per unit of risk. If you would invest  656.00  in Tariq CorpPref on October 25, 2024 and sell it today you would earn a total of  132.00  from holding Tariq CorpPref or generate 20.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	45.76%
Values	Daily Returns

Tariq CorpPref  vs.  Shadab Textile Mills

Tariq CorpPref

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Tariq CorpPref has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak fundamental indicators, Tariq CorpPref reported solid returns over the last few months and may actually be approaching a breakup point.

Shadab Textile Mills

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shadab Textile Mills are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shadab Textile sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tariq CorpPref and Shadab Textile

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

The idea behind Tariq CorpPref and Shadab 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.