Correlation Between Lucky Cement and Silkbank
Can any of the company-specific risk be diversified away by investing in both Lucky Cement and Silkbank 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 Lucky Cement and Silkbank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lucky Cement and Silkbank, you can compare the effects of market volatilities on Lucky Cement and Silkbank 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 Lucky Cement with a short position of Silkbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lucky Cement and Silkbank.
Diversification Opportunities for Lucky Cement and Silkbank
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lucky and Silkbank is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Lucky Cement and Silkbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silkbank and Lucky Cement 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 Lucky Cement are associated (or correlated) with Silkbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silkbank has no effect on the direction of Lucky Cement i.e., Lucky Cement and Silkbank go up and down completely randomly.
Pair Corralation between Lucky Cement and Silkbank
Assuming the 90 days trading horizon Lucky Cement is expected to generate 0.94 times more return on investment than Silkbank. However, Lucky Cement is 1.06 times less risky than Silkbank. It trades about 0.39 of its potential returns per unit of risk. Silkbank is currently generating about 0.31 per unit of risk. If you would invest 98,971 in Lucky Cement on September 13, 2024 and sell it today you would earn a total of 22,882 from holding Lucky Cement or generate 23.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Lucky Cement vs. Silkbank
Performance |
| Timeline |
| Lucky Cement |
| Silkbank |
Lucky Cement and Silkbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lucky Cement and Silkbank
The main advantage of trading using opposite Lucky Cement and Silkbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucky Cement position performs unexpectedly, Silkbank 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 Silkbank will offset losses from the drop in Silkbank's long position.| Lucky Cement vs. Pakistan Telecommunication | Lucky Cement vs. Air Link Communication | Lucky Cement vs. Agritech | Lucky Cement vs. Faysal Bank |
| Silkbank vs. Masood Textile Mills | Silkbank vs. Fauji Foods | Silkbank vs. KSB Pumps | Silkbank 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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