Correlation Between Pakistan Tobacco and Masood Textile
Can any of the company-specific risk be diversified away by investing in both Pakistan Tobacco and Masood Textile 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 Masood Textile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Tobacco and Masood Textile Mills, you can compare the effects of market volatilities on Pakistan Tobacco and Masood Textile 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 Masood Textile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Tobacco and Masood Textile.
Diversification Opportunities for Pakistan Tobacco and Masood Textile
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Pakistan and Masood is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Tobacco and Masood Textile Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masood Textile Mills 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 Masood Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masood Textile Mills has no effect on the direction of Pakistan Tobacco i.e., Pakistan Tobacco and Masood Textile go up and down completely randomly.
Pair Corralation between Pakistan Tobacco and Masood Textile
Assuming the 90 days trading horizon Pakistan Tobacco is expected to under-perform the Masood Textile. But the stock apears to be less risky and, when comparing its historical volatility, Pakistan Tobacco is 2.06 times less risky than Masood Textile. The stock trades about -0.18 of its potential returns per unit of risk. The Masood Textile Mills is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 4,981 in Masood Textile Mills on October 28, 2024 and sell it today you would earn a total of 535.00 from holding Masood Textile Mills or generate 10.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 76.19% |
| Values | Daily Returns |
Pakistan Tobacco vs. Masood Textile Mills
Performance |
| Timeline |
| Pakistan Tobacco |
| Masood Textile Mills |
Pakistan Tobacco and Masood Textile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Tobacco and Masood Textile
The main advantage of trading using opposite Pakistan Tobacco and Masood Textile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Tobacco position performs unexpectedly, Masood Textile 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 Masood Textile will offset losses from the drop in Masood Textile's long position.| Pakistan Tobacco vs. Atlas Insurance | Pakistan Tobacco vs. Crescent Star Insurance | Pakistan Tobacco vs. Air Link Communication | Pakistan Tobacco vs. Data Agro |
| Masood Textile vs. Quice Food Industries | Masood Textile vs. Murree Brewery | Masood Textile vs. Air Link Communication | Masood Textile vs. National Foods |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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