Correlation Between Air Link and Ghani Chemical

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Can any of the company-specific risk be diversified away by investing in both Air Link and Ghani Chemical 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 Air Link and Ghani Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Link Communication and Ghani Chemical Industries, you can compare the effects of market volatilities on Air Link and Ghani Chemical 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 Air Link with a short position of Ghani Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Link and Ghani Chemical.

Diversification Opportunities for Air Link and Ghani Chemical

-0.47
  Correlation Coefficient

Very good diversification

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

Pair Corralation between Air Link and Ghani Chemical

Assuming the 90 days trading horizon Air Link Communication is expected to generate 1.12 times more return on investment than Ghani Chemical. However, Air Link is 1.12 times more volatile than Ghani Chemical Industries. It trades about 0.16 of its potential returns per unit of risk. Ghani Chemical Industries is currently generating about 0.08 per unit of risk. If you would invest  3,551  in Air Link Communication on August 25, 2024 and sell it today you would earn a total of  9,355  from holding Air Link Communication or generate 263.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Air Link Communication  vs.  Ghani Chemical Industries

 Performance 
       Timeline  
Air Link Communication 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Air Link Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Air Link is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.
Ghani Chemical Industries 

Risk-Adjusted Performance

13 of 100

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

Air Link and Ghani Chemical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Air Link and Ghani Chemical

The main advantage of trading using opposite Air Link and Ghani Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Link position performs unexpectedly, Ghani Chemical 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 Ghani Chemical will offset losses from the drop in Ghani Chemical's long position.
The idea behind Air Link Communication and Ghani Chemical Industries 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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