Correlation Between Thatta Cement and Al Ghazi

Can any of the company-specific risk be diversified away by investing in both Thatta Cement and Al Ghazi 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 Thatta Cement and Al Ghazi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Thatta Cement and Al Ghazi Tractors, you can compare the effects of market volatilities on Thatta Cement and Al Ghazi 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 Thatta Cement with a short position of Al Ghazi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thatta Cement and Al Ghazi.

Diversification Opportunities for Thatta Cement and Al Ghazi

0.79

Correlation Coefficient

Thatta Cement  Al Ghazi

Poor diversification

The 3 months correlation between Thatta and AGTL is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Thatta Cement and Al Ghazi Tractors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Ghazi Tractors and Thatta Cement 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 Thatta Cement are associated (or correlated) with Al Ghazi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Ghazi Tractors has no effect on the direction of Thatta Cement i.e., Thatta Cement and Al Ghazi go up and down completely randomly.

Pair Corralation between Thatta Cement and Al Ghazi

Assuming the 90 days trading horizon Thatta Cement is expected to generate 1.48 times more return on investment than Al Ghazi. However, Thatta Cement is 1.48 times more volatile than Al Ghazi Tractors. It trades about 0.12 of its potential returns per unit of risk. Al Ghazi Tractors is currently generating about 0.18 per unit of risk. If you would invest  14,026  in Thatta Cement on November 19, 2024 and sell it today you would earn a total of  4,955  from holding Thatta Cement or generate 35.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Thatta Cement  vs.  Al Ghazi Tractors

Thatta Cement

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thatta Cement are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Thatta Cement disclosed solid returns over the last few months and may actually be approaching a breakup point.

Al Ghazi Tractors

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Al Ghazi Tractors are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Al Ghazi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thatta Cement and Al Ghazi

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

The idea behind Thatta Cement and Al Ghazi Tractors 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.