Correlation Between Sitara Chemical and Millat Tractors
Can any of the company-specific risk be diversified away by investing in both Sitara Chemical and Millat Tractors 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 Millat Tractors 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 Millat Tractors, you can compare the effects of market volatilities on Sitara Chemical and Millat Tractors 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 Millat Tractors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sitara Chemical and Millat Tractors.
Diversification Opportunities for Sitara Chemical and Millat Tractors
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sitara and Millat is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sitara Chemical Industries and Millat Tractors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Millat Tractors 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 Millat Tractors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Millat Tractors has no effect on the direction of Sitara Chemical i.e., Sitara Chemical and Millat Tractors go up and down completely randomly.
Pair Corralation between Sitara Chemical and Millat Tractors
Assuming the 90 days trading horizon Sitara Chemical is expected to generate 1.03 times less return on investment than Millat Tractors. In addition to that, Sitara Chemical is 1.51 times more volatile than Millat Tractors. It trades about 0.07 of its total potential returns per unit of risk. Millat Tractors is currently generating about 0.11 per unit of volatility. If you would invest 27,577 in Millat Tractors on September 12, 2024 and sell it today you would earn a total of 36,897 from holding Millat Tractors or generate 133.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 73.55% |
| Values | Daily Returns |
Sitara Chemical Industries vs. Millat Tractors
Performance |
| Timeline |
| Sitara Chemical Indu |
| Millat Tractors |
Sitara Chemical and Millat Tractors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sitara Chemical and Millat Tractors
The main advantage of trading using opposite Sitara Chemical and Millat Tractors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sitara Chemical position performs unexpectedly, Millat Tractors 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 Millat Tractors will offset losses from the drop in Millat Tractors' 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 |
| Millat Tractors vs. Pakistan Aluminium Beverage | Millat Tractors vs. Premier Insurance | Millat Tractors vs. Roshan Packages | Millat Tractors vs. Reliance Insurance Co |
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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