Correlation Between Thatta Cement and Habib Metropolitan

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

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

Diversification Opportunities for Thatta Cement and Habib Metropolitan

0.91

Correlation Coefficient

Thatta Cement  Habib Metropolitan

Almost no diversification

The 3 months correlation between Thatta and Habib is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Thatta Cement and Habib Metropolitan Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Metropolitan Bank 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 Habib Metropolitan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Metropolitan Bank has no effect on the direction of Thatta Cement i.e., Thatta Cement and Habib Metropolitan go up and down completely randomly.

Pair Corralation between Thatta Cement and Habib Metropolitan

Assuming the 90 days trading horizon Thatta Cement is expected to generate 2.61 times more return on investment than Habib Metropolitan. However, Thatta Cement is 2.61 times more volatile than Habib Metropolitan Bank. It trades about 0.31 of its potential returns per unit of risk. Habib Metropolitan Bank is currently generating about 0.11 per unit of risk. If you would invest  3,445  in Thatta Cement on September 29, 2024 and sell it today you would earn a total of  16,657  from holding Thatta Cement or generate 483.51% return on investment over 90 days.

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

Thatta Cement  vs.  Habib Metropolitan Bank

Thatta Cement

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Thatta Cement are ranked lower than 21 (%) 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.

Habib Metropolitan Bank

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Metropolitan Bank are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Habib Metropolitan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thatta Cement and Habib Metropolitan

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

The idea behind Thatta Cement and Habib Metropolitan Bank 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.