Correlation Between Pakistan Reinsurance and Crescent Steel
Can any of the company-specific risk be diversified away by investing in both Pakistan Reinsurance and Crescent Steel 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 Reinsurance and Crescent Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Reinsurance and Crescent Steel Allied, you can compare the effects of market volatilities on Pakistan Reinsurance and Crescent Steel 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 Reinsurance with a short position of Crescent Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Reinsurance and Crescent Steel.
Diversification Opportunities for Pakistan Reinsurance and Crescent Steel
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pakistan and Crescent is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Reinsurance and Crescent Steel Allied in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Steel Allied and Pakistan Reinsurance 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 Reinsurance are associated (or correlated) with Crescent Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Steel Allied has no effect on the direction of Pakistan Reinsurance i.e., Pakistan Reinsurance and Crescent Steel go up and down completely randomly.
Pair Corralation between Pakistan Reinsurance and Crescent Steel
Assuming the 90 days trading horizon Pakistan Reinsurance is expected to generate 3.3 times less return on investment than Crescent Steel. But when comparing it to its historical volatility, Pakistan Reinsurance is 1.71 times less risky than Crescent Steel. It trades about 0.08 of its potential returns per unit of risk. Crescent Steel Allied is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 5,012 in Crescent Steel Allied on November 3, 2024 and sell it today you would earn a total of 6,076 from holding Crescent Steel Allied or generate 121.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Reinsurance vs. Crescent Steel Allied
Performance |
| Timeline |
| Pakistan Reinsurance |
| Crescent Steel Allied |
Pakistan Reinsurance and Crescent Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Reinsurance and Crescent Steel
The main advantage of trading using opposite Pakistan Reinsurance and Crescent Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Reinsurance position performs unexpectedly, Crescent Steel 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 Crescent Steel will offset losses from the drop in Crescent Steel's long position.| Pakistan Reinsurance vs. Synthetic Products Enterprises | Pakistan Reinsurance vs. Ghani Chemical Industries | Pakistan Reinsurance vs. Engro Polymer Chemicals | Pakistan Reinsurance vs. Ittehad Chemicals |
| Crescent Steel vs. Sindh Modaraba Management | Crescent Steel vs. Unilever Pakistan Foods | Crescent Steel vs. Crescent Star Insurance | Crescent Steel vs. IGI Life Insurance |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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