Correlation Between Packages and Pakistan Tobacco
Can any of the company-specific risk be diversified away by investing in both Packages and Pakistan Tobacco 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 Packages and Pakistan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Packages and Pakistan Tobacco, you can compare the effects of market volatilities on Packages and Pakistan Tobacco 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 Packages with a short position of Pakistan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Packages and Pakistan Tobacco.
Diversification Opportunities for Packages and Pakistan Tobacco
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Packages and Pakistan is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Packages and Pakistan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Tobacco and Packages 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 Packages are associated (or correlated) with Pakistan Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Tobacco has no effect on the direction of Packages i.e., Packages and Pakistan Tobacco go up and down completely randomly.
Pair Corralation between Packages and Pakistan Tobacco
Assuming the 90 days trading horizon Packages is expected to generate 2.18 times more return on investment than Pakistan Tobacco. However, Packages is 2.18 times more volatile than Pakistan Tobacco. It trades about 0.24 of its potential returns per unit of risk. Pakistan Tobacco is currently generating about 0.17 per unit of risk. If you would invest 47,818 in Packages on August 25, 2024 and sell it today you would earn a total of 8,688 from holding Packages or generate 18.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Packages vs. Pakistan Tobacco
Performance |
| Timeline |
| Packages |
| Pakistan Tobacco |
Packages and Pakistan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Packages and Pakistan Tobacco
The main advantage of trading using opposite Packages and Pakistan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Packages position performs unexpectedly, Pakistan Tobacco 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 Tobacco will offset losses from the drop in Pakistan Tobacco's long position.| Packages vs. Masood Textile Mills | Packages vs. Fauji Foods | Packages vs. KSB Pumps | Packages vs. Mari Petroleum |
| Pakistan Tobacco vs. Masood Textile Mills | Pakistan Tobacco vs. Fauji Foods | Pakistan Tobacco vs. KSB Pumps | Pakistan Tobacco 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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