Correlation Between Pak Gulf and Pakistan Telecommunicatio
Can any of the company-specific risk be diversified away by investing in both Pak Gulf and Pakistan Telecommunicatio 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 Pakistan Telecommunicatio 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 Pakistan Telecommunication, you can compare the effects of market volatilities on Pak Gulf and Pakistan Telecommunicatio 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 Pakistan Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pak Gulf and Pakistan Telecommunicatio.
Diversification Opportunities for Pak Gulf and Pakistan Telecommunicatio
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pak and Pakistan is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Pak Gulf Leasing and Pakistan Telecommunication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Telecommunicatio 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 Pakistan Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Telecommunicatio has no effect on the direction of Pak Gulf i.e., Pak Gulf and Pakistan Telecommunicatio go up and down completely randomly.
Pair Corralation between Pak Gulf and Pakistan Telecommunicatio
Assuming the 90 days trading horizon Pak Gulf is expected to generate 5.79 times less return on investment than Pakistan Telecommunicatio. But when comparing it to its historical volatility, Pak Gulf Leasing is 1.22 times less risky than Pakistan Telecommunicatio. It trades about 0.1 of its potential returns per unit of risk. Pakistan Telecommunication is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest 1,607 in Pakistan Telecommunication on September 14, 2024 and sell it today you would earn a total of 1,114 from holding Pakistan Telecommunication or generate 69.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pak Gulf Leasing vs. Pakistan Telecommunication
Performance |
| Timeline |
| Pak Gulf Leasing |
| Pakistan Telecommunicatio |
Pak Gulf and Pakistan Telecommunicatio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pak Gulf and Pakistan Telecommunicatio
The main advantage of trading using opposite Pak Gulf and Pakistan Telecommunicatio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pak Gulf position performs unexpectedly, Pakistan Telecommunicatio 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 Pakistan Telecommunicatio will offset losses from the drop in Pakistan Telecommunicatio's long position.| Pak Gulf vs. Masood Textile Mills | Pak Gulf vs. Fauji Foods | Pak Gulf vs. KSB Pumps | Pak Gulf 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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