Correlation Between Pakistan Tobacco and Matco Foods
Can any of the company-specific risk be diversified away by investing in both Pakistan Tobacco and Matco Foods 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 Matco Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Tobacco and Matco Foods, you can compare the effects of market volatilities on Pakistan Tobacco and Matco Foods 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 Matco Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Tobacco and Matco Foods.
Diversification Opportunities for Pakistan Tobacco and Matco Foods
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pakistan and Matco is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Tobacco and Matco Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matco Foods 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 Matco Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matco Foods has no effect on the direction of Pakistan Tobacco i.e., Pakistan Tobacco and Matco Foods go up and down completely randomly.
Pair Corralation between Pakistan Tobacco and Matco Foods
Assuming the 90 days trading horizon Pakistan Tobacco is expected to under-perform the Matco Foods. But the stock apears to be less risky and, when comparing its historical volatility, Pakistan Tobacco is 3.14 times less risky than Matco Foods. The stock trades about -0.18 of its potential returns per unit of risk. The Matco Foods is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 2,342 in Matco Foods on August 28, 2024 and sell it today you would earn a total of 389.00 from holding Matco Foods or generate 16.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Tobacco vs. Matco Foods
Performance |
| Timeline |
| Pakistan Tobacco |
| Matco Foods |
Pakistan Tobacco and Matco Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Tobacco and Matco Foods
The main advantage of trading using opposite Pakistan Tobacco and Matco Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Tobacco position performs unexpectedly, Matco Foods 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 Matco Foods will offset losses from the drop in Matco Foods' long position.| Pakistan Tobacco vs. Masood Textile Mills | Pakistan Tobacco vs. Fauji Foods | Pakistan Tobacco vs. KSB Pumps | Pakistan Tobacco vs. Mari Petroleum |
| Matco Foods vs. Dost Steels | Matco Foods vs. Atlas Insurance | Matco Foods vs. MCB Bank | Matco Foods vs. Askari Bank |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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