Correlation Between Ittehad Chemicals and Pakistan Engineering
Can any of the company-specific risk be diversified away by investing in both Ittehad Chemicals and Pakistan Engineering 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 Ittehad Chemicals and Pakistan Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ittehad Chemicals and Pakistan Engineering, you can compare the effects of market volatilities on Ittehad Chemicals and Pakistan Engineering 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 Ittehad Chemicals with a short position of Pakistan Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ittehad Chemicals and Pakistan Engineering.
Diversification Opportunities for Ittehad Chemicals and Pakistan Engineering
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ittehad and Pakistan is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ittehad Chemicals and Pakistan Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Engineering and Ittehad Chemicals 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 Ittehad Chemicals are associated (or correlated) with Pakistan Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Engineering has no effect on the direction of Ittehad Chemicals i.e., Ittehad Chemicals and Pakistan Engineering go up and down completely randomly.
Pair Corralation between Ittehad Chemicals and Pakistan Engineering
Assuming the 90 days trading horizon Ittehad Chemicals is expected to generate 0.53 times more return on investment than Pakistan Engineering. However, Ittehad Chemicals is 1.87 times less risky than Pakistan Engineering. It trades about 0.03 of its potential returns per unit of risk. Pakistan Engineering is currently generating about 0.01 per unit of risk. If you would invest 7,040 in Ittehad Chemicals on October 25, 2024 and sell it today you would earn a total of 82.00 from holding Ittehad Chemicals or generate 1.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ittehad Chemicals vs. Pakistan Engineering
Performance |
| Timeline |
| Ittehad Chemicals |
| Pakistan Engineering |
Ittehad Chemicals and Pakistan Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ittehad Chemicals and Pakistan Engineering
The main advantage of trading using opposite Ittehad Chemicals and Pakistan Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ittehad Chemicals position performs unexpectedly, Pakistan Engineering 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 Engineering will offset losses from the drop in Pakistan Engineering's long position.| Ittehad Chemicals vs. Pakistan Synthetics | Ittehad Chemicals vs. Orient Rental Modaraba | Ittehad Chemicals vs. EFU General Insurance | Ittehad Chemicals vs. Synthetic Products Enterprises |
| Pakistan Engineering vs. IBL HealthCare | Pakistan Engineering vs. AKD Hospitality | Pakistan Engineering vs. Murree Brewery | Pakistan Engineering vs. JS Investments |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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