Correlation Between Pakistan Oilfields and Oil
Can any of the company-specific risk be diversified away by investing in both Pakistan Oilfields 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 Oilfields and Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Oilfields and Oil and Gas, you can compare the effects of market volatilities on Pakistan Oilfields 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 Oilfields with a short position of Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Oilfields and Oil.
Diversification Opportunities for Pakistan Oilfields and Oil
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pakistan and Oil is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Oilfields 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 Oilfields 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 Oilfields 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 Oilfields i.e., Pakistan Oilfields and Oil go up and down completely randomly.
Pair Corralation between Pakistan Oilfields and Oil
Assuming the 90 days trading horizon Pakistan Oilfields is expected to generate 1.45 times less return on investment than Oil. But when comparing it to its historical volatility, Pakistan Oilfields is 1.45 times less risky than Oil. It trades about 0.12 of its potential returns per unit of risk. Oil and Gas is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 7,454 in Oil and Gas on August 28, 2024 and sell it today you would earn a total of 11,828 from holding Oil and Gas or generate 158.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Oilfields vs. Oil and Gas
Performance |
| Timeline |
| Pakistan Oilfields |
| Oil and Gas |
Pakistan Oilfields and Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Oilfields and Oil
The main advantage of trading using opposite Pakistan Oilfields and Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Oilfields 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 Oilfields vs. IBL HealthCare | Pakistan Oilfields vs. Pak Datacom | Pakistan Oilfields vs. Sindh Modaraba Management | Pakistan Oilfields vs. MCB Investment Manag |
| Oil vs. Orient Rental Modaraba | Oil vs. ITTEFAQ Iron Industries | Oil vs. Nimir Industrial Chemical | Oil vs. 786 Investment Limited |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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