Correlation Between Pakistan Aluminium and Towellers
Can any of the company-specific risk be diversified away by investing in both Pakistan Aluminium and Towellers 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 Towellers 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 Towellers, you can compare the effects of market volatilities on Pakistan Aluminium and Towellers 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 Towellers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Aluminium and Towellers.
Diversification Opportunities for Pakistan Aluminium and Towellers
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pakistan and Towellers is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Aluminium Beverage and Towellers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Towellers 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 Towellers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Towellers has no effect on the direction of Pakistan Aluminium i.e., Pakistan Aluminium and Towellers go up and down completely randomly.
Pair Corralation between Pakistan Aluminium and Towellers
Assuming the 90 days trading horizon Pakistan Aluminium is expected to generate 4.65 times less return on investment than Towellers. But when comparing it to its historical volatility, Pakistan Aluminium Beverage is 1.12 times less risky than Towellers. It trades about 0.03 of its potential returns per unit of risk. Towellers is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 13,300 in Towellers on August 31, 2024 and sell it today you would earn a total of 953.00 from holding Towellers or generate 7.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Pakistan Aluminium Beverage vs. Towellers
Performance |
| Timeline |
| Pakistan Aluminium |
| Towellers |
Pakistan Aluminium and Towellers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Aluminium and Towellers
The main advantage of trading using opposite Pakistan Aluminium and Towellers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Aluminium position performs unexpectedly, Towellers 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 Towellers will offset losses from the drop in Towellers' long position.| Pakistan Aluminium vs. Habib Insurance | Pakistan Aluminium vs. Century Insurance | Pakistan Aluminium vs. Reliance Weaving Mills | Pakistan Aluminium vs. Media Times |
| Towellers vs. Sitara Chemical Industries | Towellers vs. Big Bird Foods | Towellers vs. Pakistan Synthetics | Towellers vs. Pakistan Aluminium Beverage |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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