Correlation Between Pak Gulf and Sardar Chemical
Can any of the company-specific risk be diversified away by investing in both Pak Gulf and Sardar Chemical 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 Sardar Chemical 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 Sardar Chemical Industries, you can compare the effects of market volatilities on Pak Gulf and Sardar Chemical 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 Sardar Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pak Gulf and Sardar Chemical.
Diversification Opportunities for Pak Gulf and Sardar Chemical
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pak and Sardar is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Pak Gulf Leasing and Sardar Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sardar Chemical Indu 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 Sardar Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sardar Chemical Indu has no effect on the direction of Pak Gulf i.e., Pak Gulf and Sardar Chemical go up and down completely randomly.
Pair Corralation between Pak Gulf and Sardar Chemical
Assuming the 90 days trading horizon Pak Gulf Leasing is expected to generate 1.35 times more return on investment than Sardar Chemical. However, Pak Gulf is 1.35 times more volatile than Sardar Chemical Industries. It trades about 0.15 of its potential returns per unit of risk. Sardar Chemical Industries is currently generating about 0.06 per unit of risk. If you would invest 688.00 in Pak Gulf Leasing on November 28, 2024 and sell it today you would earn a total of 1,412 from holding Pak Gulf Leasing or generate 205.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 67.28% |
| Values | Daily Returns |
Pak Gulf Leasing vs. Sardar Chemical Industries
Performance |
| Timeline |
| Pak Gulf Leasing |
| Sardar Chemical Indu |
Pak Gulf and Sardar Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pak Gulf and Sardar Chemical
The main advantage of trading using opposite Pak Gulf and Sardar Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pak Gulf position performs unexpectedly, Sardar Chemical 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 Sardar Chemical will offset losses from the drop in Sardar Chemical's long position.| Pak Gulf vs. Masood Textile Mills | Pak Gulf vs. Fauji Foods | Pak Gulf vs. KSB Pumps | Pak Gulf vs. Mari Petroleum |
| Sardar Chemical vs. Reliance Insurance Co | Sardar Chemical vs. Pakistan Reinsurance | Sardar Chemical vs. Murree Brewery | Sardar Chemical vs. JS Bank |
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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