Correlation Between Sitara Chemical and Khyber Tobacco
Can any of the company-specific risk be diversified away by investing in both Sitara Chemical and Khyber Tobacco 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 Sitara Chemical and Khyber Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sitara Chemical Industries and Khyber Tobacco, you can compare the effects of market volatilities on Sitara Chemical and Khyber Tobacco 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 Sitara Chemical with a short position of Khyber Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sitara Chemical and Khyber Tobacco.
Diversification Opportunities for Sitara Chemical and Khyber Tobacco
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Sitara and Khyber is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sitara Chemical Industries and Khyber Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Khyber Tobacco and Sitara Chemical 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 Sitara Chemical Industries are associated (or correlated) with Khyber Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Khyber Tobacco has no effect on the direction of Sitara Chemical i.e., Sitara Chemical and Khyber Tobacco go up and down completely randomly.
Pair Corralation between Sitara Chemical and Khyber Tobacco
Assuming the 90 days trading horizon Sitara Chemical Industries is expected to generate 0.48 times more return on investment than Khyber Tobacco. However, Sitara Chemical Industries is 2.09 times less risky than Khyber Tobacco. It trades about 0.07 of its potential returns per unit of risk. Khyber Tobacco is currently generating about -0.01 per unit of risk. If you would invest 21,714 in Sitara Chemical Industries on September 12, 2024 and sell it today you would earn a total of 10,189 from holding Sitara Chemical Industries or generate 46.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 45.42% |
| Values | Daily Returns |
Sitara Chemical Industries vs. Khyber Tobacco
Performance |
| Timeline |
| Sitara Chemical Indu |
| Khyber Tobacco |
Sitara Chemical and Khyber Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sitara Chemical and Khyber Tobacco
The main advantage of trading using opposite Sitara Chemical and Khyber Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sitara Chemical position performs unexpectedly, Khyber Tobacco 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 Khyber Tobacco will offset losses from the drop in Khyber Tobacco's long position.| Sitara Chemical vs. Ghandhara Automobile | Sitara Chemical vs. Engro Polymer Chemicals | Sitara Chemical vs. Wah Nobel Chemicals | Sitara Chemical vs. MCB Investment Manag |
| Khyber Tobacco vs. Unity Foods | Khyber Tobacco vs. Synthetic Products Enterprises | Khyber Tobacco vs. Sitara Chemical Industries | Khyber Tobacco vs. Amreli Steels |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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