Correlation Between Thatta Cement and Shifa International

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

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

Diversification Opportunities for Thatta Cement and Shifa International

-0.37

Correlation Coefficient

Thatta Cement  Shifa International

Very good diversification

The 3 months correlation between Thatta and Shifa is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Thatta Cement and Shifa International Hospitals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shifa International 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 Shifa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shifa International has no effect on the direction of Thatta Cement i.e., Thatta Cement and Shifa International go up and down completely randomly.

Pair Corralation between Thatta Cement and Shifa International

Assuming the 90 days trading horizon Thatta Cement is expected to generate 178.95 times less return on investment than Shifa International. But when comparing it to its historical volatility, Thatta Cement is 1.03 times less risky than Shifa International. It trades about 0.0 of its potential returns per unit of risk. Shifa International Hospitals is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  39,018  in Shifa International Hospitals on December 29, 2024 and sell it today you would earn a total of  8,986  from holding Shifa International Hospitals or generate 23.03% return on investment over 90 days.

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

Thatta Cement  vs.  Shifa International Hospitals

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.

Shifa International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shifa International Hospitals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shifa International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thatta Cement and Shifa International

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

The idea behind Thatta Cement and Shifa International Hospitals 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.