Correlation Between Pakistan Tobacco and Al Ghazi
Can any of the company-specific risk be diversified away by investing in both Pakistan Tobacco and Al Ghazi 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 Tobacco and Al Ghazi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Tobacco and Al Ghazi Tractors, you can compare the effects of market volatilities on Pakistan Tobacco and Al Ghazi 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 Tobacco with a short position of Al Ghazi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Tobacco and Al Ghazi.
Diversification Opportunities for Pakistan Tobacco and Al Ghazi
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pakistan and AGTL is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Tobacco and Al Ghazi Tractors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Ghazi Tractors and Pakistan Tobacco 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 Tobacco are associated (or correlated) with Al Ghazi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Ghazi Tractors has no effect on the direction of Pakistan Tobacco i.e., Pakistan Tobacco and Al Ghazi go up and down completely randomly.
Pair Corralation between Pakistan Tobacco and Al Ghazi
Assuming the 90 days trading horizon Pakistan Tobacco is expected to generate 1.4 times more return on investment than Al Ghazi. However, Pakistan Tobacco is 1.4 times more volatile than Al Ghazi Tractors. It trades about 0.04 of its potential returns per unit of risk. Al Ghazi Tractors is currently generating about 0.01 per unit of risk. If you would invest 101,911 in Pakistan Tobacco on September 4, 2024 and sell it today you would earn a total of 19,585 from holding Pakistan Tobacco or generate 19.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 91.53% |
| Values | Daily Returns |
Pakistan Tobacco vs. Al Ghazi Tractors
Performance |
| Timeline |
| Pakistan Tobacco |
| Al Ghazi Tractors |
Pakistan Tobacco and Al Ghazi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Tobacco and Al Ghazi
The main advantage of trading using opposite Pakistan Tobacco and Al Ghazi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Tobacco position performs unexpectedly, Al Ghazi 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 Al Ghazi will offset losses from the drop in Al Ghazi's long position.| Pakistan Tobacco vs. Masood Textile Mills | Pakistan Tobacco vs. Fauji Foods | Pakistan Tobacco vs. KSB Pumps | Pakistan Tobacco vs. Mari Petroleum |
| Al Ghazi vs. MCB Investment Manag | Al Ghazi vs. Mughal Iron Steel | Al Ghazi vs. Pakistan Telecommunication | Al Ghazi vs. Pak Gulf Leasing |
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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