Correlation Between Sindh Modaraba and Masood Textile
Can any of the company-specific risk be diversified away by investing in both Sindh Modaraba and Masood Textile 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 Sindh Modaraba and Masood Textile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sindh Modaraba Management and Masood Textile Mills, you can compare the effects of market volatilities on Sindh Modaraba and Masood Textile 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 Sindh Modaraba with a short position of Masood Textile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sindh Modaraba and Masood Textile.
Diversification Opportunities for Sindh Modaraba and Masood Textile
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sindh and Masood is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Sindh Modaraba Management and Masood Textile Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masood Textile Mills and Sindh Modaraba 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 Sindh Modaraba Management are associated (or correlated) with Masood Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masood Textile Mills has no effect on the direction of Sindh Modaraba i.e., Sindh Modaraba and Masood Textile go up and down completely randomly.
Pair Corralation between Sindh Modaraba and Masood Textile
Assuming the 90 days trading horizon Sindh Modaraba is expected to generate 3.6 times less return on investment than Masood Textile. But when comparing it to its historical volatility, Sindh Modaraba Management is 1.6 times less risky than Masood Textile. It trades about 0.05 of its potential returns per unit of risk. Masood Textile Mills is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 4,486 in Masood Textile Mills on August 29, 2024 and sell it today you would earn a total of 314.00 from holding Masood Textile Mills or generate 7.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 80.95% |
| Values | Daily Returns |
Sindh Modaraba Management vs. Masood Textile Mills
Performance |
| Timeline |
| Sindh Modaraba Management |
| Masood Textile Mills |
Sindh Modaraba and Masood Textile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sindh Modaraba and Masood Textile
The main advantage of trading using opposite Sindh Modaraba and Masood Textile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sindh Modaraba position performs unexpectedly, Masood Textile 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 Masood Textile will offset losses from the drop in Masood Textile's long position.| Sindh Modaraba vs. Masood Textile Mills | Sindh Modaraba vs. Fauji Foods | Sindh Modaraba vs. KSB Pumps | Sindh Modaraba vs. Mari Petroleum |
| Masood Textile vs. National Foods | Masood Textile vs. Engro Polymer Chemicals | Masood Textile vs. Data Agro | Masood Textile vs. Adamjee Insurance |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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