Correlation Between Bank of Punjab and Pakistan State
Can any of the company-specific risk be diversified away by investing in both Bank of Punjab and Pakistan State 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 Bank of Punjab and Pakistan State into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of Punjab and Pakistan State Oil, you can compare the effects of market volatilities on Bank of Punjab and Pakistan State 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 Bank of Punjab with a short position of Pakistan State. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Punjab and Pakistan State.
Diversification Opportunities for Bank of Punjab and Pakistan State
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Pakistan is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Punjab and Pakistan State Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan State Oil and Bank of Punjab 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 Bank of Punjab are associated (or correlated) with Pakistan State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan State Oil has no effect on the direction of Bank of Punjab i.e., Bank of Punjab and Pakistan State go up and down completely randomly.
Pair Corralation between Bank of Punjab and Pakistan State
Assuming the 90 days trading horizon Bank of Punjab is expected to generate 1.3 times more return on investment than Pakistan State. However, Bank of Punjab is 1.3 times more volatile than Pakistan State Oil. It trades about 0.11 of its potential returns per unit of risk. Pakistan State Oil is currently generating about 0.14 per unit of risk. If you would invest 305.00 in Bank of Punjab on August 31, 2024 and sell it today you would earn a total of 615.00 from holding Bank of Punjab or generate 201.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Punjab vs. Pakistan State Oil
Performance |
| Timeline |
| Bank of Punjab |
| Pakistan State Oil |
Bank of Punjab and Pakistan State Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Punjab and Pakistan State
The main advantage of trading using opposite Bank of Punjab and Pakistan State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Punjab position performs unexpectedly, Pakistan State 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 State will offset losses from the drop in Pakistan State's long position.| Bank of Punjab vs. Oil and Gas | Bank of Punjab vs. Pakistan State Oil | Bank of Punjab vs. Pakistan Petroleum | Bank of Punjab vs. Fauji Fertilizer |
| Pakistan State vs. Century Insurance | Pakistan State vs. Agritech | Pakistan State vs. Beco Steel | Pakistan State vs. National Bank of |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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