Correlation Between Lucky Cement and Towellers
Can any of the company-specific risk be diversified away by investing in both Lucky Cement and Towellers 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 Towellers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lucky Cement and Towellers, you can compare the effects of market volatilities on Lucky Cement and Towellers 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 Towellers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lucky Cement and Towellers.
Diversification Opportunities for Lucky Cement and Towellers
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lucky and Towellers is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Lucky Cement and Towellers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Towellers 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 Towellers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Towellers has no effect on the direction of Lucky Cement i.e., Lucky Cement and Towellers go up and down completely randomly.
Pair Corralation between Lucky Cement and Towellers
Assuming the 90 days trading horizon Lucky Cement is expected to generate 0.58 times more return on investment than Towellers. However, Lucky Cement is 1.71 times less risky than Towellers. It trades about 0.12 of its potential returns per unit of risk. Towellers is currently generating about 0.03 per unit of risk. If you would invest 42,019 in Lucky Cement on August 24, 2024 and sell it today you would earn a total of 60,670 from holding Lucky Cement or generate 144.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.53% |
| Values | Daily Returns |
Lucky Cement vs. Towellers
Performance |
| Timeline |
| Lucky Cement |
| Towellers |
Lucky Cement and Towellers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lucky Cement and Towellers
The main advantage of trading using opposite Lucky Cement and Towellers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucky Cement position performs unexpectedly, Towellers 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 Towellers will offset losses from the drop in Towellers' long position.| Lucky Cement vs. Habib Bank | Lucky Cement vs. National Bank of | Lucky Cement vs. United Bank | Lucky Cement vs. MCB Bank |
| Towellers vs. Orient Rental Modaraba | Towellers vs. Engro Polymer Chemicals | Towellers vs. WorldCall Telecom | Towellers vs. Unilever Pakistan Foods |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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