Correlation Between Ghani Chemical and National Foods
Can any of the company-specific risk be diversified away by investing in both Ghani Chemical and National Foods 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 Ghani Chemical and National Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ghani Chemical Industries and National Foods, you can compare the effects of market volatilities on Ghani Chemical and National Foods 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 Ghani Chemical with a short position of National Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ghani Chemical and National Foods.
Diversification Opportunities for Ghani Chemical and National Foods
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ghani and National is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ghani Chemical Industries and National Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Foods and Ghani Chemical 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 Ghani Chemical Industries are associated (or correlated) with National Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Foods has no effect on the direction of Ghani Chemical i.e., Ghani Chemical and National Foods go up and down completely randomly.
Pair Corralation between Ghani Chemical and National Foods
Assuming the 90 days trading horizon Ghani Chemical Industries is expected to generate 2.57 times more return on investment than National Foods. However, Ghani Chemical is 2.57 times more volatile than National Foods. It trades about 0.2 of its potential returns per unit of risk. National Foods is currently generating about 0.08 per unit of risk. If you would invest 1,166 in Ghani Chemical Industries on August 30, 2024 and sell it today you would earn a total of 219.00 from holding Ghani Chemical Industries or generate 18.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ghani Chemical Industries vs. National Foods
Performance |
| Timeline |
| Ghani Chemical Industries |
| National Foods |
Ghani Chemical and National Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ghani Chemical and National Foods
The main advantage of trading using opposite Ghani Chemical and National Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ghani Chemical position performs unexpectedly, National Foods 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 National Foods will offset losses from the drop in National Foods' long position.| Ghani Chemical vs. Escorts Investment Bank | Ghani Chemical vs. Atlas Insurance | Ghani Chemical vs. Unity Foods | Ghani Chemical vs. Security Investment Bank |
| National Foods vs. Masood Textile Mills | National Foods vs. Fauji Foods | National Foods vs. KSB Pumps | National Foods vs. Mari Petroleum |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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