Correlation Between Nishat Mills and Pakistan Tobacco
Can any of the company-specific risk be diversified away by investing in both Nishat Mills 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 Nishat Mills and Pakistan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nishat Mills and Pakistan Tobacco, you can compare the effects of market volatilities on Nishat Mills 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 Nishat Mills with a short position of Pakistan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nishat Mills and Pakistan Tobacco.
Diversification Opportunities for Nishat Mills and Pakistan Tobacco
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Nishat and Pakistan is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Nishat Mills and Pakistan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Tobacco and Nishat Mills 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 Nishat Mills 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 Nishat Mills i.e., Nishat Mills and Pakistan Tobacco go up and down completely randomly.
Pair Corralation between Nishat Mills and Pakistan Tobacco
Assuming the 90 days trading horizon Nishat Mills is expected to generate 2.21 times less return on investment than Pakistan Tobacco. But when comparing it to its historical volatility, Nishat Mills is 1.54 times less risky than Pakistan Tobacco. It trades about 0.07 of its potential returns per unit of risk. Pakistan Tobacco is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 54,914 in Pakistan Tobacco on September 4, 2024 and sell it today you would earn a total of 66,582 from holding Pakistan Tobacco or generate 121.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 83.75% |
| Values | Daily Returns |
Nishat Mills vs. Pakistan Tobacco
Performance |
| Timeline |
| Nishat Mills |
| Pakistan Tobacco |
Nishat Mills and Pakistan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nishat Mills and Pakistan Tobacco
The main advantage of trading using opposite Nishat Mills and Pakistan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nishat Mills 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.| Nishat Mills vs. Roshan Packages | Nishat Mills vs. Packages | Nishat Mills vs. National Foods | Nishat Mills vs. Jubilee Life Insurance |
| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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