Correlation Between Thatta Cement and KOT Addu
Can any of the company-specific risk be diversified away by investing in both Thatta Cement and KOT Addu 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 Thatta Cement and KOT Addu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thatta Cement and KOT Addu Power, you can compare the effects of market volatilities on Thatta Cement and KOT Addu 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 Thatta Cement with a short position of KOT Addu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thatta Cement and KOT Addu.
Diversification Opportunities for Thatta Cement and KOT Addu
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Thatta and KOT is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Thatta Cement and KOT Addu Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KOT Addu Power and Thatta Cement 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 Thatta Cement are associated (or correlated) with KOT Addu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KOT Addu Power has no effect on the direction of Thatta Cement i.e., Thatta Cement and KOT Addu go up and down completely randomly.
Pair Corralation between Thatta Cement and KOT Addu
Assuming the 90 days trading horizon Thatta Cement is expected to generate 4.79 times more return on investment than KOT Addu. However, Thatta Cement is 4.79 times more volatile than KOT Addu Power. It trades about 0.07 of its potential returns per unit of risk. KOT Addu Power is currently generating about -0.1 per unit of risk. If you would invest 20,340 in Thatta Cement on October 21, 2024 and sell it today you would earn a total of 798.00 from holding Thatta Cement or generate 3.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thatta Cement vs. KOT Addu Power
Performance |
| Timeline |
| Thatta Cement |
| KOT Addu Power |
Thatta Cement and KOT Addu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thatta Cement and KOT Addu
The main advantage of trading using opposite Thatta Cement and KOT Addu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thatta Cement position performs unexpectedly, KOT Addu 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 KOT Addu will offset losses from the drop in KOT Addu's long position.| Thatta Cement vs. Oil and Gas | Thatta Cement vs. Pakistan State Oil | Thatta Cement vs. Pakistan Petroleum | Thatta Cement vs. Lucky Cement |
| KOT Addu vs. Soneri Bank | KOT Addu vs. Sardar Chemical Industries | KOT Addu vs. Atlas Insurance | KOT Addu 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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