Correlation Between Oil and Nishat Mills
Can any of the company-specific risk be diversified away by investing in both Oil and Nishat Mills 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 Oil and Nishat Mills into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oil and Gas and Nishat Mills, you can compare the effects of market volatilities on Oil and Nishat Mills 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 Oil with a short position of Nishat Mills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil and Nishat Mills.
Diversification Opportunities for Oil and Nishat Mills
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Oil and Nishat is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Oil and Gas and Nishat Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nishat Mills and Oil 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 Oil and Gas are associated (or correlated) with Nishat Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nishat Mills has no effect on the direction of Oil i.e., Oil and Nishat Mills go up and down completely randomly.
Pair Corralation between Oil and Nishat Mills
Assuming the 90 days trading horizon Oil and Gas is expected to generate 1.27 times more return on investment than Nishat Mills. However, Oil is 1.27 times more volatile than Nishat Mills. It trades about 0.12 of its potential returns per unit of risk. Nishat Mills is currently generating about 0.05 per unit of risk. If you would invest 6,985 in Oil and Gas on August 31, 2024 and sell it today you would earn a total of 12,540 from holding Oil and Gas or generate 179.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oil and Gas vs. Nishat Mills
Performance |
| Timeline |
| Oil and Gas |
| Nishat Mills |
Oil and Nishat Mills Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil and Nishat Mills
The main advantage of trading using opposite Oil and Nishat Mills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil position performs unexpectedly, Nishat Mills 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 Nishat Mills will offset losses from the drop in Nishat Mills' long position.The idea behind Oil and Gas and Nishat Mills 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.| Nishat Mills vs. Pakistan Hotel Developers | Nishat Mills vs. ITTEFAQ Iron Industries | Nishat Mills vs. Century Insurance | Nishat Mills vs. Air Link Communication |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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