Correlation Between National Foods and Pakistan Tobacco
Can any of the company-specific risk be diversified away by investing in both National Foods and Pakistan Tobacco 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 National Foods and Pakistan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Foods and Pakistan Tobacco, you can compare the effects of market volatilities on National Foods and Pakistan Tobacco 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 National Foods with a short position of Pakistan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Foods and Pakistan Tobacco.
Diversification Opportunities for National Foods and Pakistan Tobacco
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and Pakistan is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding National Foods and Pakistan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Tobacco and National Foods 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 National Foods are associated (or correlated) with Pakistan Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Tobacco has no effect on the direction of National Foods i.e., National Foods and Pakistan Tobacco go up and down completely randomly.
Pair Corralation between National Foods and Pakistan Tobacco
Assuming the 90 days trading horizon National Foods is expected to generate 1.01 times more return on investment than Pakistan Tobacco. However, National Foods is 1.01 times more volatile than Pakistan Tobacco. It trades about -0.02 of its potential returns per unit of risk. Pakistan Tobacco is currently generating about -0.18 per unit of risk. If you would invest 16,699 in National Foods on August 28, 2024 and sell it today you would lose (141.00) from holding National Foods or give up 0.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Foods vs. Pakistan Tobacco
Performance |
| Timeline |
| National Foods |
| Pakistan Tobacco |
National Foods and Pakistan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Foods and Pakistan Tobacco
The main advantage of trading using opposite National Foods and Pakistan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Foods position performs unexpectedly, Pakistan Tobacco 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 Tobacco will offset losses from the drop in Pakistan Tobacco's long position.| National Foods vs. Matco Foods | National Foods vs. Pakistan Aluminium Beverage | National Foods vs. Crescent Star Insurance | National Foods vs. Unity Foods |
| Pakistan Tobacco vs. Masood Textile Mills | Pakistan Tobacco vs. Fauji Foods | Pakistan Tobacco vs. KSB Pumps | Pakistan Tobacco 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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