Correlation Between Askari Bank and Pakistan Tobacco
Can any of the company-specific risk be diversified away by investing in both Askari Bank and Pakistan Tobacco 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 Askari Bank and Pakistan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Askari Bank and Pakistan Tobacco, you can compare the effects of market volatilities on Askari Bank and Pakistan Tobacco 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 Askari Bank with a short position of Pakistan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Askari Bank and Pakistan Tobacco.
Diversification Opportunities for Askari Bank and Pakistan Tobacco
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Askari and Pakistan is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Askari Bank and Pakistan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Tobacco and Askari Bank 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 Askari Bank are associated (or correlated) with Pakistan Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Tobacco has no effect on the direction of Askari Bank i.e., Askari Bank and Pakistan Tobacco go up and down completely randomly.
Pair Corralation between Askari Bank and Pakistan Tobacco
Assuming the 90 days trading horizon Askari Bank is expected to generate 0.81 times more return on investment than Pakistan Tobacco. However, Askari Bank is 1.23 times less risky than Pakistan Tobacco. It trades about 0.1 of its potential returns per unit of risk. Pakistan Tobacco is currently generating about 0.07 per unit of risk. If you would invest 1,434 in Askari Bank on December 2, 2024 and sell it today you would earn a total of 2,567 from holding Askari Bank or generate 179.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 86.13% |
| Values | Daily Returns |
Askari Bank vs. Pakistan Tobacco
Performance |
| Timeline |
| Askari Bank |
| Pakistan Tobacco |
Askari Bank and Pakistan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Askari Bank and Pakistan Tobacco
The main advantage of trading using opposite Askari Bank and Pakistan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Askari Bank position performs unexpectedly, Pakistan Tobacco 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 Pakistan Tobacco will offset losses from the drop in Pakistan Tobacco's long position.| Askari Bank vs. MCB Investment Manag | ||
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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