Correlation Between KSB Pumps and Nishat Mills
Can any of the company-specific risk be diversified away by investing in both KSB Pumps and Nishat Mills 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 KSB Pumps and Nishat Mills into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KSB Pumps and Nishat Mills, you can compare the effects of market volatilities on KSB Pumps and Nishat Mills 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 KSB Pumps with a short position of Nishat Mills. Check out your portfolio center. Please also check ongoing floating volatility patterns of KSB Pumps and Nishat Mills.
Diversification Opportunities for KSB Pumps and Nishat Mills
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KSB and Nishat is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding KSB Pumps and Nishat Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nishat Mills and KSB Pumps 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 KSB Pumps are associated (or correlated) with Nishat Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nishat Mills has no effect on the direction of KSB Pumps i.e., KSB Pumps and Nishat Mills go up and down completely randomly.
Pair Corralation between KSB Pumps and Nishat Mills
Assuming the 90 days trading horizon KSB Pumps is expected to generate 2.06 times less return on investment than Nishat Mills. But when comparing it to its historical volatility, KSB Pumps is 1.26 times less risky than Nishat Mills. It trades about 0.09 of its potential returns per unit of risk. Nishat Mills is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 7,206 in Nishat Mills on November 2, 2024 and sell it today you would earn a total of 2,263 from holding Nishat Mills or generate 31.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KSB Pumps vs. Nishat Mills
Performance |
| Timeline |
| KSB Pumps |
| Nishat Mills |
KSB Pumps and Nishat Mills Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KSB Pumps and Nishat Mills
The main advantage of trading using opposite KSB Pumps and Nishat Mills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KSB Pumps position performs unexpectedly, Nishat Mills 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 Nishat Mills will offset losses from the drop in Nishat Mills' long position.| KSB Pumps vs. Lotte Chemical Pakistan | KSB Pumps vs. Ittehad Chemicals | KSB Pumps vs. Nimir Industrial Chemical | KSB Pumps vs. The Organic Meat |
| Nishat Mills vs. Engro Polymer Chemicals | Nishat Mills vs. Synthetic Products Enterprises | Nishat Mills vs. Avanceon | Nishat Mills vs. Pakistan Aluminium Beverage |
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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