Correlation Between Pakistan Tobacco and Ghandhara Automobile
Can any of the company-specific risk be diversified away by investing in both Pakistan Tobacco and Ghandhara Automobile 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 Ghandhara Automobile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Tobacco and Ghandhara Automobile, you can compare the effects of market volatilities on Pakistan Tobacco and Ghandhara Automobile 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 Ghandhara Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Tobacco and Ghandhara Automobile.
Diversification Opportunities for Pakistan Tobacco and Ghandhara Automobile
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Pakistan and Ghandhara is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Tobacco and Ghandhara Automobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ghandhara Automobile 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 Ghandhara Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ghandhara Automobile has no effect on the direction of Pakistan Tobacco i.e., Pakistan Tobacco and Ghandhara Automobile go up and down completely randomly.
Pair Corralation between Pakistan Tobacco and Ghandhara Automobile
Assuming the 90 days trading horizon Pakistan Tobacco is expected to generate 4.0 times less return on investment than Ghandhara Automobile. But when comparing it to its historical volatility, Pakistan Tobacco is 1.26 times less risky than Ghandhara Automobile. It trades about 0.05 of its potential returns per unit of risk. Ghandhara Automobile is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 3,338 in Ghandhara Automobile on August 30, 2024 and sell it today you would earn a total of 21,355 from holding Ghandhara Automobile or generate 639.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.66% |
| Values | Daily Returns |
Pakistan Tobacco vs. Ghandhara Automobile
Performance |
| Timeline |
| Pakistan Tobacco |
| Ghandhara Automobile |
Pakistan Tobacco and Ghandhara Automobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Tobacco and Ghandhara Automobile
The main advantage of trading using opposite Pakistan Tobacco and Ghandhara Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Tobacco position performs unexpectedly, Ghandhara Automobile 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 Ghandhara Automobile will offset losses from the drop in Ghandhara Automobile's long position.| Pakistan Tobacco vs. Masood Textile Mills | Pakistan Tobacco vs. Fauji Foods | Pakistan Tobacco vs. KSB Pumps | Pakistan Tobacco vs. Mari Petroleum |
| Ghandhara Automobile vs. Habib Insurance | Ghandhara Automobile vs. Century Insurance | Ghandhara Automobile vs. Reliance Weaving Mills | Ghandhara Automobile vs. Media Times |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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