Correlation Between Pak Gulf and Agritech
Can any of the company-specific risk be diversified away by investing in both Pak Gulf and Agritech 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 Pak Gulf and Agritech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pak Gulf Leasing and Agritech, you can compare the effects of market volatilities on Pak Gulf and Agritech 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 Pak Gulf with a short position of Agritech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pak Gulf and Agritech.
Diversification Opportunities for Pak Gulf and Agritech
Very weak diversification
The 3 months correlation between Pak and Agritech is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Pak Gulf Leasing and Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agritech and Pak Gulf 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 Pak Gulf Leasing are associated (or correlated) with Agritech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agritech has no effect on the direction of Pak Gulf i.e., Pak Gulf and Agritech go up and down completely randomly.
Pair Corralation between Pak Gulf and Agritech
Assuming the 90 days trading horizon Pak Gulf is expected to generate 1.26 times less return on investment than Agritech. In addition to that, Pak Gulf is 1.3 times more volatile than Agritech. It trades about 0.11 of its total potential returns per unit of risk. Agritech is currently generating about 0.18 per unit of volatility. If you would invest 2,010 in Agritech on August 27, 2024 and sell it today you would earn a total of 1,990 from holding Agritech or generate 99.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.54% |
| Values | Daily Returns |
Pak Gulf Leasing vs. Agritech
Performance |
| Timeline |
| Pak Gulf Leasing |
| Agritech |
Pak Gulf and Agritech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pak Gulf and Agritech
The main advantage of trading using opposite Pak Gulf and Agritech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pak Gulf position performs unexpectedly, Agritech 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 Agritech will offset losses from the drop in Agritech's long position.| Pak Gulf vs. Masood Textile Mills | Pak Gulf vs. Fauji Foods | Pak Gulf vs. KSB Pumps | Pak Gulf vs. Mari Petroleum |
| Agritech vs. Masood Textile Mills | Agritech vs. Fauji Foods | Agritech vs. KSB Pumps | Agritech 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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