Correlation Between Thatta Cement and JS Investments

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

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

Diversification Opportunities for Thatta Cement and JS Investments

0.82

Correlation Coefficient

Thatta Cement  JS Investments

Very poor diversification

The 3 months correlation between Thatta and JSIL is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Thatta Cement and JS Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JS Investments 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 JS Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JS Investments has no effect on the direction of Thatta Cement i.e., Thatta Cement and JS Investments go up and down completely randomly.

Pair Corralation between Thatta Cement and JS Investments

Assuming the 90 days trading horizon Thatta Cement is expected to generate 1.45 times more return on investment than JS Investments. However, Thatta Cement is 1.45 times more volatile than JS Investments. It trades about 0.41 of its potential returns per unit of risk. JS Investments is currently generating about 0.07 per unit of risk. If you would invest  5,190  in Thatta Cement on September 15, 2024 and sell it today you would earn a total of  14,430  from holding Thatta Cement or generate 278.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.88%
Values	Daily Returns

Thatta Cement  vs.  JS Investments

Thatta Cement

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Thatta Cement are ranked lower than 32 (%) 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.

JS Investments

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JS Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JS Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thatta Cement and JS Investments

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

The idea behind Thatta Cement and JS Investments 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.