Correlation Between National Foods and Ghani Chemical
Can any of the company-specific risk be diversified away by investing in both National Foods and Ghani Chemical 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 National Foods and Ghani Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Foods and Ghani Chemical Industries, you can compare the effects of market volatilities on National Foods and Ghani Chemical 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 National Foods with a short position of Ghani Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Foods and Ghani Chemical.
Diversification Opportunities for National Foods and Ghani Chemical
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between National and Ghani is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding National Foods and Ghani Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ghani Chemical Industries and National Foods 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 National Foods are associated (or correlated) with Ghani Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ghani Chemical Industries has no effect on the direction of National Foods i.e., National Foods and Ghani Chemical go up and down completely randomly.
Pair Corralation between National Foods and Ghani Chemical
Assuming the 90 days trading horizon National Foods is expected to generate 8.51 times less return on investment than Ghani Chemical. But when comparing it to its historical volatility, National Foods is 3.54 times less risky than Ghani Chemical. It trades about 0.13 of its potential returns per unit of risk. Ghani Chemical Industries is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 1,082 in Ghani Chemical Industries on August 26, 2024 and sell it today you would earn a total of 341.00 from holding Ghani Chemical Industries or generate 31.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Foods vs. Ghani Chemical Industries
Performance |
| Timeline |
| National Foods |
| Ghani Chemical Industries |
National Foods and Ghani Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Foods and Ghani Chemical
The main advantage of trading using opposite National Foods and Ghani Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Foods position performs unexpectedly, Ghani Chemical 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 Ghani Chemical will offset losses from the drop in Ghani Chemical's long position.| National Foods vs. Faysal Bank | National Foods vs. Unilever Pakistan Foods | National Foods vs. Soneri Bank | National Foods vs. The Organic Meat |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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