Correlation Between Thatta Cement and Premier Insurance

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

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

Diversification Opportunities for Thatta Cement and Premier Insurance

-0.47

Correlation Coefficient

Thatta Cement  Premier Insurance

Very good diversification

The 3 months correlation between Thatta and Premier is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Thatta Cement and Premier Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Insurance 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 Premier Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Insurance has no effect on the direction of Thatta Cement i.e., Thatta Cement and Premier Insurance go up and down completely randomly.

Pair Corralation between Thatta Cement and Premier Insurance

Assuming the 90 days trading horizon Thatta Cement is expected to generate 1.44 times more return on investment than Premier Insurance. However, Thatta Cement is 1.44 times more volatile than Premier Insurance. It trades about 0.41 of its potential returns per unit of risk. Premier Insurance is currently generating about -0.02 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 Against
Strength	Very Weak
Accuracy	78.13%
Values	Daily Returns

Thatta Cement  vs.  Premier Insurance

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.

Premier Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premier Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Premier Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Thatta Cement and Premier Insurance

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

The idea behind Thatta Cement and Premier Insurance 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.