Correlation Between Thatta Cement and K Electric
Can any of the company-specific risk be diversified away by investing in both Thatta Cement and K Electric 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 K Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thatta Cement and K Electric, you can compare the effects of market volatilities on Thatta Cement and K Electric 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 K Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thatta Cement and K Electric.
Diversification Opportunities for Thatta Cement and K Electric
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Thatta and KEL is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Thatta Cement and K Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K Electric 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 K Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K Electric has no effect on the direction of Thatta Cement i.e., Thatta Cement and K Electric go up and down completely randomly.
Pair Corralation between Thatta Cement and K Electric
Assuming the 90 days trading horizon Thatta Cement is expected to generate 1.29 times more return on investment than K Electric. However, Thatta Cement is 1.29 times more volatile than K Electric. It trades about 0.36 of its potential returns per unit of risk. K Electric is currently generating about 0.21 per unit of risk. If you would invest 7,545 in Thatta Cement on August 27, 2024 and sell it today you would earn a total of 7,437 from holding Thatta Cement or generate 98.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thatta Cement vs. K Electric
Performance |
| Timeline |
| Thatta Cement |
| K Electric |
Thatta Cement and K Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thatta Cement and K Electric
The main advantage of trading using opposite Thatta Cement and K Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thatta Cement position performs unexpectedly, K Electric 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 K Electric will offset losses from the drop in K Electric's long position.| Thatta Cement vs. Shaheen Insurance | Thatta Cement vs. Pakistan Hotel Developers | Thatta Cement vs. Jubilee Life Insurance | Thatta Cement vs. Hi Tech Lubricants |
| K Electric vs. Pakistan State Oil | K Electric vs. Oil and Gas | K Electric vs. Lucky Cement | K Electric vs. Engro |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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