Correlation Between Thatta Cement and Nishat Mills

Can any of the company-specific risk be diversified away by investing in both Thatta Cement and Nishat Mills 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 Nishat Mills into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Thatta Cement and Nishat Mills, you can compare the effects of market volatilities on Thatta Cement and Nishat Mills 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 Nishat Mills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thatta Cement and Nishat Mills.

Diversification Opportunities for Thatta Cement and Nishat Mills

0.71

Correlation Coefficient

Thatta Cement  Nishat Mills

Poor diversification

The 3 months correlation between Thatta and Nishat is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Thatta Cement and Nishat Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nishat Mills 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 Nishat Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nishat Mills has no effect on the direction of Thatta Cement i.e., Thatta Cement and Nishat Mills go up and down completely randomly.

Pair Corralation between Thatta Cement and Nishat Mills

Assuming the 90 days trading horizon Thatta Cement is expected to generate 2.49 times more return on investment than Nishat Mills. However, Thatta Cement is 2.49 times more volatile than Nishat Mills. It trades about 0.35 of its potential returns per unit of risk. Nishat Mills is currently generating about 0.16 per unit of risk. If you would invest  5,343  in Thatta Cement on August 30, 2024 and sell it today you would earn a total of  9,035  from holding Thatta Cement or generate 169.1% 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.  Nishat Mills

Thatta Cement

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Thatta Cement are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Thatta Cement disclosed solid returns over the last few months and may actually be approaching a breakup point.

Nishat Mills

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nishat Mills are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Nishat Mills reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thatta Cement and Nishat Mills

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

The idea behind Thatta Cement and Nishat Mills 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.