Correlation Between Pakistan Tobacco and Shifa International
Can any of the company-specific risk be diversified away by investing in both Pakistan Tobacco and Shifa International 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 Shifa International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Tobacco and Shifa International Hospitals, you can compare the effects of market volatilities on Pakistan Tobacco and Shifa International 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 Shifa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Tobacco and Shifa International.
Diversification Opportunities for Pakistan Tobacco and Shifa International
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pakistan and Shifa is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Tobacco and Shifa International Hospitals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shifa International 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 Shifa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shifa International has no effect on the direction of Pakistan Tobacco i.e., Pakistan Tobacco and Shifa International go up and down completely randomly.
Pair Corralation between Pakistan Tobacco and Shifa International
Assuming the 90 days trading horizon Pakistan Tobacco is expected to generate 1.26 times less return on investment than Shifa International. In addition to that, Pakistan Tobacco is 1.14 times more volatile than Shifa International Hospitals. It trades about 0.1 of its total potential returns per unit of risk. Shifa International Hospitals is currently generating about 0.15 per unit of volatility. If you would invest 11,324 in Shifa International Hospitals on September 2, 2024 and sell it today you would earn a total of 28,253 from holding Shifa International Hospitals or generate 249.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 87.32% |
| Values | Daily Returns |
Pakistan Tobacco vs. Shifa International Hospitals
Performance |
| Timeline |
| Pakistan Tobacco |
| Shifa International |
Pakistan Tobacco and Shifa International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Tobacco and Shifa International
The main advantage of trading using opposite Pakistan Tobacco and Shifa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Tobacco position performs unexpectedly, Shifa International 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 Shifa International will offset losses from the drop in Shifa International's long position.| Pakistan Tobacco vs. Al Ghazi Tractors | Pakistan Tobacco vs. Shell Pakistan | Pakistan Tobacco vs. Pakistan State Oil | Pakistan Tobacco vs. Millat Tractors |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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