Correlation Between Bank of Punjab and Pakistan Telecommunicatio
Can any of the company-specific risk be diversified away by investing in both Bank of Punjab and Pakistan Telecommunicatio 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 Telecommunicatio 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 Telecommunication, you can compare the effects of market volatilities on Bank of Punjab and Pakistan Telecommunicatio 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 Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Punjab and Pakistan Telecommunicatio.
Diversification Opportunities for Bank of Punjab and Pakistan Telecommunicatio
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Pakistan is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Punjab and Pakistan Telecommunication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Telecommunicatio 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 Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Telecommunicatio has no effect on the direction of Bank of Punjab i.e., Bank of Punjab and Pakistan Telecommunicatio go up and down completely randomly.
Pair Corralation between Bank of Punjab and Pakistan Telecommunicatio
Assuming the 90 days trading horizon Bank of Punjab is expected to generate 1.69 times less return on investment than Pakistan Telecommunicatio. But when comparing it to its historical volatility, Bank of Punjab is 1.22 times less risky than Pakistan Telecommunicatio. It trades about 0.05 of its potential returns per unit of risk. Pakistan Telecommunication is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 691.00 in Pakistan Telecommunication on August 28, 2024 and sell it today you would earn a total of 1,090 from holding Pakistan Telecommunication or generate 157.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Punjab vs. Pakistan Telecommunication
Performance |
| Timeline |
| Bank of Punjab |
| Pakistan Telecommunicatio |
Bank of Punjab and Pakistan Telecommunicatio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Punjab and Pakistan Telecommunicatio
The main advantage of trading using opposite Bank of Punjab and Pakistan Telecommunicatio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Punjab position performs unexpectedly, Pakistan Telecommunicatio 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 Telecommunicatio will offset losses from the drop in Pakistan Telecommunicatio's long position.| Bank of Punjab vs. National Bank of | Bank of Punjab vs. Meezan Bank | Bank of Punjab vs. Bank Al Habib | Bank of Punjab vs. Habib Metropolitan Bank |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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