Correlation Between National Refinery and Hinopak Motors
Can any of the company-specific risk be diversified away by investing in both National Refinery and Hinopak Motors 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 Refinery and Hinopak Motors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Refinery and Hinopak Motors, you can compare the effects of market volatilities on National Refinery and Hinopak Motors 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 Refinery with a short position of Hinopak Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Refinery and Hinopak Motors.
Diversification Opportunities for National Refinery and Hinopak Motors
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between National and Hinopak is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding National Refinery and Hinopak Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hinopak Motors and National Refinery 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 Refinery are associated (or correlated) with Hinopak Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hinopak Motors has no effect on the direction of National Refinery i.e., National Refinery and Hinopak Motors go up and down completely randomly.
Pair Corralation between National Refinery and Hinopak Motors
Assuming the 90 days trading horizon National Refinery is expected to generate 1.55 times more return on investment than Hinopak Motors. However, National Refinery is 1.55 times more volatile than Hinopak Motors. It trades about 0.21 of its potential returns per unit of risk. Hinopak Motors is currently generating about 0.02 per unit of risk. If you would invest 21,245 in National Refinery on August 27, 2024 and sell it today you would earn a total of 2,583 from holding National Refinery or generate 12.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Refinery vs. Hinopak Motors
Performance |
| Timeline |
| National Refinery |
| Hinopak Motors |
National Refinery and Hinopak Motors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Refinery and Hinopak Motors
The main advantage of trading using opposite National Refinery and Hinopak Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Refinery position performs unexpectedly, Hinopak Motors 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 Hinopak Motors will offset losses from the drop in Hinopak Motors' long position.| National Refinery vs. Al Ghazi Tractors | National Refinery vs. Shell Pakistan | National Refinery vs. Nestle Pakistan | National Refinery vs. Hinopak Motors |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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