Correlation Between Pakistan Tobacco and Universal Insurance
Can any of the company-specific risk be diversified away by investing in both Pakistan Tobacco and Universal Insurance 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 Universal Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Tobacco and Universal Insurance, you can compare the effects of market volatilities on Pakistan Tobacco and Universal Insurance 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 Universal Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Tobacco and Universal Insurance.
Diversification Opportunities for Pakistan Tobacco and Universal Insurance
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Pakistan and Universal is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Tobacco and Universal Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance 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 Universal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Insurance has no effect on the direction of Pakistan Tobacco i.e., Pakistan Tobacco and Universal Insurance go up and down completely randomly.
Pair Corralation between Pakistan Tobacco and Universal Insurance
Assuming the 90 days trading horizon Pakistan Tobacco is expected to under-perform the Universal Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Pakistan Tobacco is 6.22 times less risky than Universal Insurance. The stock trades about -0.19 of its potential returns per unit of risk. The Universal Insurance is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 1,035 in Universal Insurance on November 7, 2024 and sell it today you would lose (34.00) from holding Universal Insurance or give up 3.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Pakistan Tobacco vs. Universal Insurance
Performance |
| Timeline |
| Pakistan Tobacco |
| Universal Insurance |
Pakistan Tobacco and Universal Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Tobacco and Universal Insurance
The main advantage of trading using opposite Pakistan Tobacco and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Tobacco position performs unexpectedly, Universal Insurance 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 Universal Insurance will offset losses from the drop in Universal Insurance's long position.| Pakistan Tobacco vs. Fauji Foods | Pakistan Tobacco vs. Supernet Technologie | Pakistan Tobacco vs. Unity Foods | Pakistan Tobacco vs. NetSol Technologies |
| Universal Insurance vs. Masood Textile Mills | Universal Insurance vs. Fauji Foods | Universal Insurance vs. KSB Pumps | Universal Insurance vs. Mari Petroleum |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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