Correlation Between Pakistan Petroleum and Dost Steels
Can any of the company-specific risk be diversified away by investing in both Pakistan Petroleum and Dost Steels 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 Dost Steels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Petroleum and Dost Steels, you can compare the effects of market volatilities on Pakistan Petroleum and Dost Steels 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 Dost Steels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Petroleum and Dost Steels.
Diversification Opportunities for Pakistan Petroleum and Dost Steels
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pakistan and Dost is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Petroleum and Dost Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dost Steels 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 Dost Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dost Steels has no effect on the direction of Pakistan Petroleum i.e., Pakistan Petroleum and Dost Steels go up and down completely randomly.
Pair Corralation between Pakistan Petroleum and Dost Steels
Assuming the 90 days trading horizon Pakistan Petroleum is expected to generate 0.72 times more return on investment than Dost Steels. However, Pakistan Petroleum is 1.4 times less risky than Dost Steels. It trades about 0.37 of its potential returns per unit of risk. Dost Steels is currently generating about 0.19 per unit of risk. If you would invest 13,124 in Pakistan Petroleum on August 25, 2024 and sell it today you would earn a total of 2,421 from holding Pakistan Petroleum or generate 18.45% 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. Dost Steels
Performance |
| Timeline |
| Pakistan Petroleum |
| Dost Steels |
Pakistan Petroleum and Dost Steels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Petroleum and Dost Steels
The main advantage of trading using opposite Pakistan Petroleum and Dost Steels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Petroleum position performs unexpectedly, Dost Steels 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 Dost Steels will offset losses from the drop in Dost Steels' long position.| Pakistan Petroleum vs. East West Insurance | Pakistan Petroleum vs. Pakistan Telecommunication | Pakistan Petroleum vs. Crescent Star Insurance | Pakistan Petroleum vs. WorldCall Telecom |
| Dost Steels vs. Oil and Gas | Dost Steels vs. Pakistan State Oil | Dost Steels vs. Pakistan Petroleum | Dost Steels vs. Engro |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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