Correlation Between Nasdaq and Pakistan Engineering
Can any of the company-specific risk be diversified away by investing in both Nasdaq 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 Nasdaq and Pakistan Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Pakistan Engineering, you can compare the effects of market volatilities on Nasdaq 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 Nasdaq with a short position of Pakistan Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Pakistan Engineering.
Diversification Opportunities for Nasdaq and Pakistan Engineering
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nasdaq and Pakistan is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Pakistan Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Engineering and Nasdaq 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 Nasdaq Inc 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 Nasdaq i.e., Nasdaq and Pakistan Engineering go up and down completely randomly.
Pair Corralation between Nasdaq and Pakistan Engineering
Given the investment horizon of 90 days Nasdaq is expected to generate 6.05 times less return on investment than Pakistan Engineering. But when comparing it to its historical volatility, Nasdaq Inc is 11.0 times less risky than Pakistan Engineering. It trades about 0.13 of its potential returns per unit of risk. Pakistan Engineering is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 42,570 in Pakistan Engineering on October 22, 2024 and sell it today you would earn a total of 18,450 from holding Pakistan Engineering or generate 43.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 85.96% |
| Values | Daily Returns |
Nasdaq Inc vs. Pakistan Engineering
Performance |
| Timeline |
| Nasdaq Inc |
| Pakistan Engineering |
Nasdaq and Pakistan Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and Pakistan Engineering
The main advantage of trading using opposite Nasdaq and Pakistan Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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.The idea behind Nasdaq Inc and Pakistan Engineering pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Pakistan Engineering vs. Fauji Foods | Pakistan Engineering vs. TPL Insurance | Pakistan Engineering vs. IGI Life Insurance | Pakistan Engineering vs. Matco Foods |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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