Correlation Between Pakistan Aluminium and Khyber Tobacco
Can any of the company-specific risk be diversified away by investing in both Pakistan Aluminium and Khyber 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 Pakistan Aluminium and Khyber Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Aluminium Beverage and Khyber Tobacco, you can compare the effects of market volatilities on Pakistan Aluminium and Khyber 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 Pakistan Aluminium with a short position of Khyber Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Aluminium and Khyber Tobacco.
Diversification Opportunities for Pakistan Aluminium and Khyber Tobacco
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Pakistan and Khyber is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Aluminium Beverage and Khyber Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Khyber Tobacco and Pakistan Aluminium 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 Pakistan Aluminium Beverage are associated (or correlated) with Khyber Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Khyber Tobacco has no effect on the direction of Pakistan Aluminium i.e., Pakistan Aluminium and Khyber Tobacco go up and down completely randomly.
Pair Corralation between Pakistan Aluminium and Khyber Tobacco
Assuming the 90 days trading horizon Pakistan Aluminium Beverage is expected to generate 1.33 times more return on investment than Khyber Tobacco. However, Pakistan Aluminium is 1.33 times more volatile than Khyber Tobacco. It trades about -0.04 of its potential returns per unit of risk. Khyber Tobacco is currently generating about -0.09 per unit of risk. If you would invest 8,543 in Pakistan Aluminium Beverage on September 4, 2024 and sell it today you would lose (142.00) from holding Pakistan Aluminium Beverage or give up 1.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Aluminium Beverage vs. Khyber Tobacco
Performance |
| Timeline |
| Pakistan Aluminium |
| Khyber Tobacco |
Pakistan Aluminium and Khyber Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Aluminium and Khyber Tobacco
The main advantage of trading using opposite Pakistan Aluminium and Khyber Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Aluminium position performs unexpectedly, Khyber 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 Khyber Tobacco will offset losses from the drop in Khyber Tobacco's long position.| Pakistan Aluminium vs. Habib Insurance | Pakistan Aluminium vs. Pakistan Refinery | Pakistan Aluminium vs. Century Insurance | Pakistan Aluminium vs. Reliance Weaving Mills |
| Khyber Tobacco vs. Sindh Modaraba Management | Khyber Tobacco vs. Engro Polymer Chemicals | Khyber Tobacco vs. Air Link Communication | Khyber Tobacco vs. Security Investment Bank |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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