Correlation Between Pakistan Tobacco and Silkbank
Can any of the company-specific risk be diversified away by investing in both Pakistan Tobacco and Silkbank 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 Silkbank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Tobacco and Silkbank, you can compare the effects of market volatilities on Pakistan Tobacco and Silkbank 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 Silkbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Tobacco and Silkbank.
Diversification Opportunities for Pakistan Tobacco and Silkbank
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pakistan and Silkbank is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Tobacco and Silkbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silkbank 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 Silkbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silkbank has no effect on the direction of Pakistan Tobacco i.e., Pakistan Tobacco and Silkbank go up and down completely randomly.
Pair Corralation between Pakistan Tobacco and Silkbank
Assuming the 90 days trading horizon Pakistan Tobacco is expected to under-perform the Silkbank. But the stock apears to be less risky and, when comparing its historical volatility, Pakistan Tobacco is 1.98 times less risky than Silkbank. The stock trades about -0.23 of its potential returns per unit of risk. The Silkbank is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 102.00 in Silkbank on October 25, 2024 and sell it today you would lose (2.00) from holding Silkbank or give up 1.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Tobacco vs. Silkbank
Performance |
| Timeline |
| Pakistan Tobacco |
| Silkbank |
Pakistan Tobacco and Silkbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Tobacco and Silkbank
The main advantage of trading using opposite Pakistan Tobacco and Silkbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Tobacco position performs unexpectedly, Silkbank 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 Silkbank will offset losses from the drop in Silkbank's long position.| Pakistan Tobacco vs. Honda Atlas Cars | Pakistan Tobacco vs. Pakistan Hotel Developers | Pakistan Tobacco vs. Pakistan Reinsurance | Pakistan Tobacco vs. Century Insurance |
| Silkbank vs. NetSol Technologies | Silkbank vs. Pakistan Aluminium Beverage | Silkbank vs. Big Bird Foods | Silkbank vs. Matco 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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