Correlation Between Ghandhara Automobile and Hi Tech

Can any of the company-specific risk be diversified away by investing in both Ghandhara Automobile and Hi Tech 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 Ghandhara Automobile and Hi Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ghandhara Automobile and Hi Tech Lubricants, you can compare the effects of market volatilities on Ghandhara Automobile and Hi Tech 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 Ghandhara Automobile with a short position of Hi Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ghandhara Automobile and Hi Tech.

Diversification Opportunities for Ghandhara Automobile and Hi Tech

0.7

Correlation Coefficient

Ghandhara Automobile  Hi Tech

Poor diversification

The 3 months correlation between Ghandhara and HTL is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ghandhara Automobile and Hi Tech Lubricants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Tech Lubricants and Ghandhara Automobile 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 Ghandhara Automobile are associated (or correlated) with Hi Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Tech Lubricants has no effect on the direction of Ghandhara Automobile i.e., Ghandhara Automobile and Hi Tech go up and down completely randomly.

Pair Corralation between Ghandhara Automobile and Hi Tech

Assuming the 90 days trading horizon Ghandhara Automobile is expected to generate 1.34 times more return on investment than Hi Tech. However, Ghandhara Automobile is 1.34 times more volatile than Hi Tech Lubricants. It trades about 0.17 of its potential returns per unit of risk. Hi Tech Lubricants is currently generating about 0.1 per unit of risk. If you would invest  3,879  in Ghandhara Automobile on September 12, 2024 and sell it today you would earn a total of  24,377  from holding Ghandhara Automobile or generate 628.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Ghandhara Automobile  vs.  Hi Tech Lubricants

Ghandhara Automobile

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ghandhara Automobile are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ghandhara Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

Hi Tech Lubricants

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hi Tech Lubricants are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Hi Tech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ghandhara Automobile and Hi Tech

The main advantage of trading using opposite Ghandhara Automobile and Hi Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ghandhara Automobile position performs unexpectedly, Hi Tech 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 Hi Tech will offset losses from the drop in Hi Tech's long position.

The idea behind Ghandhara Automobile and Hi Tech Lubricants pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.