Correlation Between National Foods and Pakistan International
Can any of the company-specific risk be diversified away by investing in both National Foods and Pakistan International 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 International 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 International Bulk, you can compare the effects of market volatilities on National Foods and Pakistan International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Foods and Pakistan International.
Diversification Opportunities for National Foods and Pakistan International
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Pakistan is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding National Foods and Pakistan International Bulk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan International has no effect on the direction of National Foods i.e., National Foods and Pakistan International go up and down completely randomly.
Pair Corralation between National Foods and Pakistan International
Assuming the 90 days trading horizon National Foods is expected to generate 48.79 times less return on investment than Pakistan International. But when comparing it to its historical volatility, National Foods is 48.61 times less risky than Pakistan International. It trades about 0.1 of its potential returns per unit of risk. Pakistan International Bulk is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 557.00 in Pakistan International Bulk on September 14, 2024 and sell it today you would earn a total of 350.00 from holding Pakistan International Bulk or generate 62.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.87% |
| Values | Daily Returns |
National Foods vs. Pakistan International Bulk
Performance |
| Timeline |
| National Foods |
| Pakistan International |
National Foods and Pakistan International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Foods and Pakistan International
The main advantage of trading using opposite National Foods and Pakistan International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Foods position performs unexpectedly, Pakistan International 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 International will offset losses from the drop in Pakistan International's long position.| National Foods vs. Masood Textile Mills | National Foods vs. Fauji Foods | National Foods vs. KSB Pumps | National Foods vs. Mari Petroleum |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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