Correlation Between Hinopak Motors and Pakistan Petroleum
Can any of the company-specific risk be diversified away by investing in both Hinopak Motors and Pakistan Petroleum 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 Hinopak Motors and Pakistan Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hinopak Motors and Pakistan Petroleum, you can compare the effects of market volatilities on Hinopak Motors and Pakistan Petroleum 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 Hinopak Motors with a short position of Pakistan Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hinopak Motors and Pakistan Petroleum.
Diversification Opportunities for Hinopak Motors and Pakistan Petroleum
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hinopak and Pakistan is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Hinopak Motors and Pakistan Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Petroleum and Hinopak Motors 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 Hinopak Motors are associated (or correlated) with Pakistan Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Petroleum has no effect on the direction of Hinopak Motors i.e., Hinopak Motors and Pakistan Petroleum go up and down completely randomly.
Pair Corralation between Hinopak Motors and Pakistan Petroleum
Assuming the 90 days trading horizon Hinopak Motors is expected to generate 6.0 times less return on investment than Pakistan Petroleum. But when comparing it to its historical volatility, Hinopak Motors is 1.5 times less risky than Pakistan Petroleum. It trades about 0.04 of its potential returns per unit of risk. Pakistan Petroleum is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 13,705 in Pakistan Petroleum on August 30, 2024 and sell it today you would earn a total of 1,562 from holding Pakistan Petroleum or generate 11.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Hinopak Motors vs. Pakistan Petroleum
Performance |
| Timeline |
| Hinopak Motors |
| Pakistan Petroleum |
Hinopak Motors and Pakistan Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hinopak Motors and Pakistan Petroleum
The main advantage of trading using opposite Hinopak Motors and Pakistan Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hinopak Motors position performs unexpectedly, Pakistan Petroleum 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 Petroleum will offset losses from the drop in Pakistan Petroleum's long position.| Hinopak Motors vs. Oil and Gas | Hinopak Motors vs. Pakistan State Oil | Hinopak Motors vs. Pakistan Petroleum | Hinopak Motors vs. Engro |
| Pakistan Petroleum vs. Masood Textile Mills | Pakistan Petroleum vs. Fauji Foods | Pakistan Petroleum vs. KSB Pumps | Pakistan Petroleum vs. Mari Petroleum |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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