Correlation Between United Bank and Thatta Cement

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

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

Diversification Opportunities for United Bank and Thatta Cement

-0.49

Correlation Coefficient

United Bank  Thatta Cement

Very good diversification

The 3 months correlation between United and Thatta is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding United Bank and Thatta Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thatta Cement and United Bank 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 United Bank are associated (or correlated) with Thatta Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thatta Cement has no effect on the direction of United Bank i.e., United Bank and Thatta Cement go up and down completely randomly.

Pair Corralation between United Bank and Thatta Cement

Assuming the 90 days trading horizon United Bank is expected to generate 0.72 times more return on investment than Thatta Cement. However, United Bank is 1.39 times less risky than Thatta Cement. It trades about 0.11 of its potential returns per unit of risk. Thatta Cement is currently generating about -0.02 per unit of risk. If you would invest  37,180  in United Bank on December 31, 2024 and sell it today you would earn a total of  3,909  from holding United Bank or generate 10.51% return on investment over 90 days.

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

United Bank  vs.  Thatta Cement

United Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, United Bank may actually be approaching a critical reversion point that can send shares even higher in May 2025.

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

Pair Trading with United Bank and Thatta Cement

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

The idea behind United Bank and Thatta Cement 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.

Check out your portfolio center.

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 Anywhere module to track or share privately all of your investments from the convenience of any device.