Correlation Between Pakistan Petroleum and Bank Al
Can any of the company-specific risk be diversified away by investing in both Pakistan Petroleum and Bank Al 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 Petroleum and Bank Al into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Petroleum and Bank Al Habib, you can compare the effects of market volatilities on Pakistan Petroleum and Bank Al 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 Petroleum with a short position of Bank Al. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Petroleum and Bank Al.
Diversification Opportunities for Pakistan Petroleum and Bank Al
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pakistan and Bank is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Petroleum and Bank Al Habib in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Al Habib and Pakistan Petroleum 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 Petroleum are associated (or correlated) with Bank Al. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Al Habib has no effect on the direction of Pakistan Petroleum i.e., Pakistan Petroleum and Bank Al go up and down completely randomly.
Pair Corralation between Pakistan Petroleum and Bank Al
Assuming the 90 days trading horizon Pakistan Petroleum is expected to generate 1.56 times less return on investment than Bank Al. But when comparing it to its historical volatility, Pakistan Petroleum is 1.02 times less risky than Bank Al. It trades about 0.24 of its potential returns per unit of risk. Bank Al Habib is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 10,852 in Bank Al Habib on September 3, 2024 and sell it today you would earn a total of 2,694 from holding Bank Al Habib or generate 24.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Petroleum vs. Bank Al Habib
Performance |
| Timeline |
| Pakistan Petroleum |
| Bank Al Habib |
Pakistan Petroleum and Bank Al Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Petroleum and Bank Al
The main advantage of trading using opposite Pakistan Petroleum and Bank Al positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Petroleum position performs unexpectedly, Bank Al 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 Bank Al will offset losses from the drop in Bank Al's long position.| Pakistan Petroleum vs. Jubilee Life Insurance | Pakistan Petroleum vs. JS Global Banking | Pakistan Petroleum vs. Air Link Communication | Pakistan Petroleum vs. Soneri Bank |
| Bank Al vs. Shaheen Insurance | Bank Al vs. Honda Atlas Cars | Bank Al vs. Reliance Insurance Co | Bank Al vs. MCB Investment Manag |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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