Correlation Between Thatta Cement and Air Link

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

By analyzing existing cross correlation between Thatta Cement and Air Link Communication, you can compare the effects of market volatilities on Thatta Cement and Air Link 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 Air Link. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thatta Cement and Air Link.

Diversification Opportunities for Thatta Cement and Air Link

0.84

Correlation Coefficient

Thatta Cement  Air Link

Very poor diversification

The 3 months correlation between Thatta and Air is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Thatta Cement and Air Link Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Link Communication 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 Air Link. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Link Communication has no effect on the direction of Thatta Cement i.e., Thatta Cement and Air Link go up and down completely randomly.

Pair Corralation between Thatta Cement and Air Link

Assuming the 90 days trading horizon Thatta Cement is expected to generate 5.83 times less return on investment than Air Link. In addition to that, Thatta Cement is 1.17 times more volatile than Air Link Communication. It trades about 0.0 of its total potential returns per unit of risk. Air Link Communication is currently generating about 0.03 per unit of volatility. If you would invest  16,865  in Air Link Communication on December 4, 2024 and sell it today you would earn a total of  563.00  from holding Air Link Communication or generate 3.34% return on investment over 90 days.

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

Thatta Cement  vs.  Air Link Communication

Thatta Cement

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thatta Cement has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Thatta Cement is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Air Link Communication

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air Link Communication are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Air Link may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Thatta Cement and Air Link

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

The idea behind Thatta Cement and Air Link Communication 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.