Correlation Between Pakistan Tobacco and Oil
Can any of the company-specific risk be diversified away by investing in both Pakistan Tobacco and Oil 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 Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Tobacco and Oil and Gas, you can compare the effects of market volatilities on Pakistan Tobacco and Oil 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 Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Tobacco and Oil.
Diversification Opportunities for Pakistan Tobacco and Oil
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pakistan and Oil is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Tobacco and Oil and Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil and Gas 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 Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil and Gas has no effect on the direction of Pakistan Tobacco i.e., Pakistan Tobacco and Oil go up and down completely randomly.
Pair Corralation between Pakistan Tobacco and Oil
Assuming the 90 days trading horizon Pakistan Tobacco is expected to generate 1.29 times less return on investment than Oil. In addition to that, Pakistan Tobacco is 1.24 times more volatile than Oil and Gas. It trades about 0.05 of its total potential returns per unit of risk. Oil and Gas is currently generating about 0.09 per unit of volatility. If you would invest 8,376 in Oil and Gas on November 4, 2024 and sell it today you would earn a total of 12,275 from holding Oil and Gas or generate 146.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 85.74% |
| Values | Daily Returns |
Pakistan Tobacco vs. Oil and Gas
Performance |
| Timeline |
| Pakistan Tobacco |
| Oil and Gas |
Pakistan Tobacco and Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Tobacco and Oil
The main advantage of trading using opposite Pakistan Tobacco and Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Tobacco position performs unexpectedly, Oil 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 Oil will offset losses from the drop in Oil's long position.| Pakistan Tobacco vs. Big Bird Foods | Pakistan Tobacco vs. WorldCall Telecom | Pakistan Tobacco vs. Unity Foods | Pakistan Tobacco vs. Sitara Chemical Industries |
| Oil vs. Sindh Modaraba Management | Oil vs. Beco Steel | Oil vs. Big Bird Foods | Oil vs. Supernet Technologie |
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 Stocks Directory module to find actively traded stocks across global markets.
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