Correlation Between Pakistan Petroleum and Fauji Cement
Can any of the company-specific risk be diversified away by investing in both Pakistan Petroleum and Fauji Cement 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 Fauji Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Petroleum and Fauji Cement, you can compare the effects of market volatilities on Pakistan Petroleum and Fauji Cement 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 Fauji Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Petroleum and Fauji Cement.
Diversification Opportunities for Pakistan Petroleum and Fauji Cement
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pakistan and Fauji is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Petroleum and Fauji Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fauji Cement 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 Fauji Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fauji Cement has no effect on the direction of Pakistan Petroleum i.e., Pakistan Petroleum and Fauji Cement go up and down completely randomly.
Pair Corralation between Pakistan Petroleum and Fauji Cement
Assuming the 90 days trading horizon Pakistan Petroleum is expected to generate 1.28 times less return on investment than Fauji Cement. But when comparing it to its historical volatility, Pakistan Petroleum is 1.0 times less risky than Fauji Cement. It trades about 0.11 of its potential returns per unit of risk. Fauji Cement is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,780 in Fauji Cement on September 14, 2024 and sell it today you would earn a total of 2,079 from holding Fauji Cement or generate 116.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Petroleum vs. Fauji Cement
Performance |
| Timeline |
| Pakistan Petroleum |
| Fauji Cement |
Pakistan Petroleum and Fauji Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Petroleum and Fauji Cement
The main advantage of trading using opposite Pakistan Petroleum and Fauji Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Petroleum position performs unexpectedly, Fauji Cement 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 Fauji Cement will offset losses from the drop in Fauji Cement's long position.| Pakistan Petroleum vs. AKD Hospitality | Pakistan Petroleum vs. Crescent Star Insurance | Pakistan Petroleum vs. Murree Brewery | Pakistan Petroleum vs. Engro Polymer Chemicals |
| Fauji Cement vs. Oil and Gas | Fauji Cement vs. Pakistan State Oil | Fauji Cement vs. Pakistan Petroleum | Fauji Cement vs. Fauji Fertilizer |
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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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