Correlation Between Oil and Roshan Packages
Can any of the company-specific risk be diversified away by investing in both Oil and Roshan Packages 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 Roshan Packages 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 Roshan Packages, you can compare the effects of market volatilities on Oil and Roshan Packages 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 Roshan Packages. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil and Roshan Packages.
Diversification Opportunities for Oil and Roshan Packages
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Oil and Roshan is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Oil and Gas and Roshan Packages in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roshan Packages 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 Roshan Packages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roshan Packages has no effect on the direction of Oil i.e., Oil and Roshan Packages go up and down completely randomly.
Pair Corralation between Oil and Roshan Packages
Assuming the 90 days trading horizon Oil and Gas is expected to generate 0.9 times more return on investment than Roshan Packages. However, Oil and Gas is 1.11 times less risky than Roshan Packages. It trades about 0.09 of its potential returns per unit of risk. Roshan Packages is currently generating about 0.05 per unit of risk. If you would invest 11,519 in Oil and Gas on September 12, 2024 and sell it today you would earn a total of 7,857 from holding Oil and Gas or generate 68.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oil and Gas vs. Roshan Packages
Performance |
| Timeline |
| Oil and Gas |
| Roshan Packages |
Oil and Roshan Packages Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil and Roshan Packages
The main advantage of trading using opposite Oil and Roshan Packages positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil position performs unexpectedly, Roshan Packages 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 Roshan Packages will offset losses from the drop in Roshan Packages' long position.The idea behind Oil and Gas and Roshan Packages 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.| Roshan Packages vs. Oil and Gas | Roshan Packages vs. Pakistan State Oil | Roshan Packages vs. Pakistan Petroleum | Roshan Packages vs. Fauji Fertilizer |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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