Correlation Between K Electric and Pakistan State
Can any of the company-specific risk be diversified away by investing in both K Electric 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 K Electric and Pakistan State into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between K Electric and Pakistan State Oil, you can compare the effects of market volatilities on K Electric 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 K Electric with a short position of Pakistan State. Check out your portfolio center. Please also check ongoing floating volatility patterns of K Electric and Pakistan State.
Diversification Opportunities for K Electric and Pakistan State
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between KEL and Pakistan is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding K Electric 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 K Electric 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 K Electric 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 K Electric i.e., K Electric and Pakistan State go up and down completely randomly.
Pair Corralation between K Electric and Pakistan State
Assuming the 90 days trading horizon K Electric is expected to generate 1.5 times more return on investment than Pakistan State. However, K Electric is 1.5 times more volatile than Pakistan State Oil. It trades about 0.07 of its potential returns per unit of risk. Pakistan State Oil is currently generating about 0.08 per unit of risk. If you would invest 236.00 in K Electric on August 28, 2024 and sell it today you would earn a total of 283.00 from holding K Electric or generate 119.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
K Electric vs. Pakistan State Oil
Performance |
| Timeline |
| K Electric |
| Pakistan State Oil |
K Electric and Pakistan State Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with K Electric and Pakistan State
The main advantage of trading using opposite K Electric and Pakistan State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K Electric 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.| K Electric vs. Pakistan State Oil | K Electric vs. Oil and Gas | K Electric vs. Lucky Cement | K Electric vs. Engro |
| Pakistan State vs. Dost Steels | Pakistan State vs. Allied Bank | Pakistan State vs. Adamjee Insurance | Pakistan State vs. Metropolitan Steel Corp |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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