Correlation Between Pakistan Tobacco and Organic Meat
Can any of the company-specific risk be diversified away by investing in both Pakistan Tobacco and Organic Meat 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 Organic Meat into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Tobacco and The Organic Meat, you can compare the effects of market volatilities on Pakistan Tobacco and Organic Meat 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 Organic Meat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Tobacco and Organic Meat.
Diversification Opportunities for Pakistan Tobacco and Organic Meat
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Pakistan and Organic is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Tobacco and The Organic Meat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Organic Meat 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 Organic Meat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Organic Meat has no effect on the direction of Pakistan Tobacco i.e., Pakistan Tobacco and Organic Meat go up and down completely randomly.
Pair Corralation between Pakistan Tobacco and Organic Meat
Assuming the 90 days trading horizon Pakistan Tobacco is expected to generate 1.2 times more return on investment than Organic Meat. However, Pakistan Tobacco is 1.2 times more volatile than The Organic Meat. It trades about 0.22 of its potential returns per unit of risk. The Organic Meat is currently generating about -0.14 per unit of risk. If you would invest 84,803 in Pakistan Tobacco on August 28, 2024 and sell it today you would earn a total of 37,368 from holding Pakistan Tobacco or generate 44.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Tobacco vs. The Organic Meat
Performance |
| Timeline |
| Pakistan Tobacco |
| Organic Meat |
Pakistan Tobacco and Organic Meat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Tobacco and Organic Meat
The main advantage of trading using opposite Pakistan Tobacco and Organic Meat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Tobacco position performs unexpectedly, Organic Meat 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 Organic Meat will offset losses from the drop in Organic Meat's long position.| Pakistan Tobacco vs. Masood Textile Mills | Pakistan Tobacco vs. Fauji Foods | Pakistan Tobacco vs. KSB Pumps | Pakistan Tobacco vs. Mari Petroleum |
| Organic Meat vs. Habib Insurance | Organic Meat vs. Century Insurance | Organic Meat vs. Reliance Weaving Mills | Organic Meat vs. Media Times |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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