Correlation Between Pak Datacom and PICIC Insurance
Can any of the company-specific risk be diversified away by investing in both Pak Datacom and PICIC Insurance 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 Pak Datacom and PICIC Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pak Datacom and PICIC Insurance, you can compare the effects of market volatilities on Pak Datacom and PICIC Insurance 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 Pak Datacom with a short position of PICIC Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pak Datacom and PICIC Insurance.
Diversification Opportunities for Pak Datacom and PICIC Insurance
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pak and PICIC is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Pak Datacom and PICIC Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PICIC Insurance and Pak Datacom 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 Pak Datacom are associated (or correlated) with PICIC Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PICIC Insurance has no effect on the direction of Pak Datacom i.e., Pak Datacom and PICIC Insurance go up and down completely randomly.
Pair Corralation between Pak Datacom and PICIC Insurance
Assuming the 90 days trading horizon Pak Datacom is expected to under-perform the PICIC Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Pak Datacom is 3.83 times less risky than PICIC Insurance. The stock trades about -0.02 of its potential returns per unit of risk. The PICIC Insurance is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 206.00 in PICIC Insurance on January 13, 2025 and sell it today you would earn a total of 14.00 from holding PICIC Insurance or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pak Datacom vs. PICIC Insurance
Performance |
| Timeline |
| Pak Datacom |
| PICIC Insurance |
Pak Datacom and PICIC Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pak Datacom and PICIC Insurance
The main advantage of trading using opposite Pak Datacom and PICIC Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pak Datacom position performs unexpectedly, PICIC Insurance 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 PICIC Insurance will offset losses from the drop in PICIC Insurance's long position.| Pak Datacom vs. Masood Textile Mills | Pak Datacom vs. Fauji Foods | Pak Datacom vs. KSB Pumps | Pak Datacom vs. Mari Petroleum |
| PICIC Insurance vs. Masood Textile Mills | PICIC Insurance vs. Fauji Foods | PICIC Insurance vs. KSB Pumps | PICIC Insurance vs. Mari Petroleum |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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