Correlation Between Pakistan Oilfields and Pakistan Petroleum
Can any of the company-specific risk be diversified away by investing in both Pakistan Oilfields and Pakistan Petroleum 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 Pakistan Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Oilfields and Pakistan Petroleum, you can compare the effects of market volatilities on Pakistan Oilfields and Pakistan Petroleum 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 Pakistan Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Oilfields and Pakistan Petroleum.
Diversification Opportunities for Pakistan Oilfields and Pakistan Petroleum
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pakistan and Pakistan is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Oilfields and Pakistan Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Petroleum 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 Pakistan Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Petroleum has no effect on the direction of Pakistan Oilfields i.e., Pakistan Oilfields and Pakistan Petroleum go up and down completely randomly.
Pair Corralation between Pakistan Oilfields and Pakistan Petroleum
Assuming the 90 days trading horizon Pakistan Oilfields is expected to generate 1.44 times less return on investment than Pakistan Petroleum. But when comparing it to its historical volatility, Pakistan Oilfields is 1.42 times less risky than Pakistan Petroleum. It trades about 0.12 of its potential returns per unit of risk. Pakistan Petroleum is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 5,982 in Pakistan Petroleum on August 28, 2024 and sell it today you would earn a total of 9,425 from holding Pakistan Petroleum or generate 157.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Oilfields vs. Pakistan Petroleum
Performance |
| Timeline |
| Pakistan Oilfields |
| Pakistan Petroleum |
Pakistan Oilfields and Pakistan Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Oilfields and Pakistan Petroleum
The main advantage of trading using opposite Pakistan Oilfields and Pakistan Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Oilfields position performs unexpectedly, Pakistan Petroleum 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 Petroleum will offset losses from the drop in Pakistan Petroleum'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 |
| Pakistan Petroleum vs. Al Ghazi Tractors | Pakistan Petroleum vs. Shell Pakistan | Pakistan Petroleum vs. Nestle Pakistan | Pakistan Petroleum vs. Hinopak Motors |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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