Correlation Between Thatta Cement and Hub Power

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

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

Diversification Opportunities for Thatta Cement and Hub Power

0.38

Correlation Coefficient

Thatta Cement  Hub Power

Weak diversification

The 3 months correlation between Thatta and Hub is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Thatta Cement and Hub Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hub Power 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 Hub Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hub Power has no effect on the direction of Thatta Cement i.e., Thatta Cement and Hub Power go up and down completely randomly.

Pair Corralation between Thatta Cement and Hub Power

Assuming the 90 days trading horizon Thatta Cement is expected to generate 131.75 times less return on investment than Hub Power. In addition to that, Thatta Cement is 1.5 times more volatile than Hub Power. It trades about 0.0 of its total potential returns per unit of risk. Hub Power is currently generating about 0.17 per unit of volatility. If you would invest  12,489  in Hub Power on December 30, 2024 and sell it today you would earn a total of  2,143  from holding Hub Power or generate 17.16% return on investment over 90 days.

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

Thatta Cement  vs.  Hub Power

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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Hub Power

Risk-Adjusted Performance

Good

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

Pair Trading with Thatta Cement and Hub Power

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

The idea behind Thatta Cement and Hub Power 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.