Correlation Between Murree Brewery and Ittehad Chemicals
Can any of the company-specific risk be diversified away by investing in both Murree Brewery and Ittehad Chemicals 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 Murree Brewery and Ittehad Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Murree Brewery and Ittehad Chemicals, you can compare the effects of market volatilities on Murree Brewery and Ittehad Chemicals 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 Murree Brewery with a short position of Ittehad Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Murree Brewery and Ittehad Chemicals.
Diversification Opportunities for Murree Brewery and Ittehad Chemicals
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Murree and Ittehad is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Murree Brewery and Ittehad Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ittehad Chemicals and Murree Brewery 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 Murree Brewery are associated (or correlated) with Ittehad Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ittehad Chemicals has no effect on the direction of Murree Brewery i.e., Murree Brewery and Ittehad Chemicals go up and down completely randomly.
Pair Corralation between Murree Brewery and Ittehad Chemicals
Assuming the 90 days trading horizon Murree Brewery is expected to generate 0.67 times more return on investment than Ittehad Chemicals. However, Murree Brewery is 1.5 times less risky than Ittehad Chemicals. It trades about 0.29 of its potential returns per unit of risk. Ittehad Chemicals is currently generating about 0.18 per unit of risk. If you would invest 51,220 in Murree Brewery on August 28, 2024 and sell it today you would earn a total of 15,780 from holding Murree Brewery or generate 30.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Murree Brewery vs. Ittehad Chemicals
Performance |
| Timeline |
| Murree Brewery |
| Ittehad Chemicals |
Murree Brewery and Ittehad Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Murree Brewery and Ittehad Chemicals
The main advantage of trading using opposite Murree Brewery and Ittehad Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Murree Brewery position performs unexpectedly, Ittehad Chemicals 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 Ittehad Chemicals will offset losses from the drop in Ittehad Chemicals' long position.| Murree Brewery vs. Habib Insurance | Murree Brewery vs. Century Insurance | Murree Brewery vs. Reliance Weaving Mills | Murree Brewery vs. Media Times |
| Ittehad Chemicals vs. Masood Textile Mills | Ittehad Chemicals vs. Fauji Foods | Ittehad Chemicals vs. KSB Pumps | Ittehad Chemicals 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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