Correlation Between Pakistan Tobacco and International Steels
Can any of the company-specific risk be diversified away by investing in both Pakistan Tobacco and International Steels 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 International Steels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Tobacco and International Steels, you can compare the effects of market volatilities on Pakistan Tobacco and International Steels 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 International Steels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Tobacco and International Steels.
Diversification Opportunities for Pakistan Tobacco and International Steels
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Pakistan and International is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Tobacco and International Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Steels 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 International Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Steels has no effect on the direction of Pakistan Tobacco i.e., Pakistan Tobacco and International Steels go up and down completely randomly.
Pair Corralation between Pakistan Tobacco and International Steels
Assuming the 90 days trading horizon Pakistan Tobacco is expected to generate 72.51 times less return on investment than International Steels. But when comparing it to its historical volatility, Pakistan Tobacco is 1.64 times less risky than International Steels. It trades about 0.0 of its potential returns per unit of risk. International Steels is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 7,133 in International Steels on October 26, 2024 and sell it today you would earn a total of 2,020 from holding International Steels or generate 28.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Tobacco vs. International Steels
Performance |
| Timeline |
| Pakistan Tobacco |
| International Steels |
Pakistan Tobacco and International Steels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Tobacco and International Steels
The main advantage of trading using opposite Pakistan Tobacco and International Steels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Tobacco position performs unexpectedly, International Steels 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 International Steels will offset losses from the drop in International Steels' long position.| Pakistan Tobacco vs. Matco Foods | Pakistan Tobacco vs. Wah Nobel Chemicals | Pakistan Tobacco vs. Engro Polymer Chemicals | Pakistan Tobacco vs. Ghani Chemical Industries |
| International Steels vs. Ittehad Chemicals | International Steels vs. Pakistan Hotel Developers | International Steels vs. Shifa International Hospitals | International Steels vs. Fateh Sports Wear |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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