Correlation Between Pakistan Aluminium and Nishat Mills
Can any of the company-specific risk be diversified away by investing in both Pakistan Aluminium 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 Pakistan Aluminium and Nishat Mills 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 Nishat Mills, you can compare the effects of market volatilities on Pakistan Aluminium 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 Pakistan Aluminium with a short position of Nishat Mills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Aluminium and Nishat Mills.
Diversification Opportunities for Pakistan Aluminium and Nishat Mills
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pakistan and Nishat is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Aluminium Beverage and Nishat Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nishat Mills 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 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 Pakistan Aluminium i.e., Pakistan Aluminium and Nishat Mills go up and down completely randomly.
Pair Corralation between Pakistan Aluminium and Nishat Mills
Assuming the 90 days trading horizon Pakistan Aluminium Beverage is expected to under-perform the Nishat Mills. But the stock apears to be less risky and, when comparing its historical volatility, Pakistan Aluminium Beverage is 1.35 times less risky than Nishat Mills. The stock trades about -0.04 of its potential returns per unit of risk. The Nishat Mills is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 7,206 in Nishat Mills on September 4, 2024 and sell it today you would earn a total of 915.00 from holding Nishat Mills or generate 12.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Aluminium Beverage vs. Nishat Mills
Performance |
| Timeline |
| Pakistan Aluminium |
| Nishat Mills |
Pakistan Aluminium and Nishat Mills Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Aluminium and Nishat Mills
The main advantage of trading using opposite Pakistan Aluminium and Nishat Mills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Aluminium 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.| Pakistan Aluminium vs. Habib Insurance | Pakistan Aluminium vs. Pakistan Refinery | Pakistan Aluminium vs. Century Insurance | Pakistan Aluminium vs. Reliance Weaving Mills |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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