Correlation Between Pakistan Hotel and Oil
Can any of the company-specific risk be diversified away by investing in both Pakistan Hotel and Oil 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 Hotel and Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Hotel Developers and Oil and Gas, you can compare the effects of market volatilities on Pakistan Hotel and Oil 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 Hotel with a short position of Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Hotel and Oil.
Diversification Opportunities for Pakistan Hotel and Oil
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pakistan and Oil is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Hotel Developers and Oil and Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil and Gas and Pakistan Hotel 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 Hotel Developers are associated (or correlated) with Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil and Gas has no effect on the direction of Pakistan Hotel i.e., Pakistan Hotel and Oil go up and down completely randomly.
Pair Corralation between Pakistan Hotel and Oil
Assuming the 90 days trading horizon Pakistan Hotel Developers is expected to under-perform the Oil. In addition to that, Pakistan Hotel is 1.22 times more volatile than Oil and Gas. It trades about -0.32 of its total potential returns per unit of risk. Oil and Gas is currently generating about -0.05 per unit of volatility. If you would invest 21,942 in Oil and Gas on October 26, 2024 and sell it today you would lose (551.00) from holding Oil and Gas or give up 2.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 90.0% |
| Values | Daily Returns |
Pakistan Hotel Developers vs. Oil and Gas
Performance |
| Timeline |
| Pakistan Hotel Developers |
| Oil and Gas |
Pakistan Hotel and Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Hotel and Oil
The main advantage of trading using opposite Pakistan Hotel and Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Hotel position performs unexpectedly, Oil 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 Oil will offset losses from the drop in Oil's long position.| Pakistan Hotel vs. JS Investments | Pakistan Hotel vs. EFU General Insurance | Pakistan Hotel vs. Silkbank | Pakistan Hotel vs. Adamjee Insurance |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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