Correlation Between Hi Tech and Al Ghazi
Can any of the company-specific risk be diversified away by investing in both Hi Tech and Al Ghazi 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 Hi Tech and Al Ghazi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hi Tech Lubricants and Al Ghazi Tractors, you can compare the effects of market volatilities on Hi Tech and Al Ghazi 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 Hi Tech with a short position of Al Ghazi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hi Tech and Al Ghazi.
Diversification Opportunities for Hi Tech and Al Ghazi
Average diversification
The 3 months correlation between HTL and AGTL is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Hi Tech Lubricants and Al Ghazi Tractors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Ghazi Tractors and Hi Tech 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 Hi Tech Lubricants are associated (or correlated) with Al Ghazi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Ghazi Tractors has no effect on the direction of Hi Tech i.e., Hi Tech and Al Ghazi go up and down completely randomly.
Pair Corralation between Hi Tech and Al Ghazi
Assuming the 90 days trading horizon Hi Tech Lubricants is expected to generate 2.49 times more return on investment than Al Ghazi. However, Hi Tech is 2.49 times more volatile than Al Ghazi Tractors. It trades about 0.25 of its potential returns per unit of risk. Al Ghazi Tractors is currently generating about -0.1 per unit of risk. If you would invest 3,848 in Hi Tech Lubricants on August 31, 2024 and sell it today you would earn a total of 812.00 from holding Hi Tech Lubricants or generate 21.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Hi Tech Lubricants vs. Al Ghazi Tractors
Performance |
| Timeline |
| Hi Tech Lubricants |
| Al Ghazi Tractors |
Hi Tech and Al Ghazi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hi Tech and Al Ghazi
The main advantage of trading using opposite Hi Tech and Al Ghazi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hi Tech position performs unexpectedly, Al Ghazi 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 Al Ghazi will offset losses from the drop in Al Ghazi's long position.| Hi Tech vs. Data Agro | Hi Tech vs. Bank of Punjab | Hi Tech vs. 786 Investment Limited | Hi Tech vs. Askari Bank |
| Al Ghazi vs. Synthetic Products Enterprises | Al Ghazi vs. Aisha Steel Mills | Al Ghazi vs. Sitara Chemical Industries | Al Ghazi vs. Agha Steel Industries |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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