Correlation Between Pakistan Petroleum and Gul Ahmed
Can any of the company-specific risk be diversified away by investing in both Pakistan Petroleum and Gul Ahmed 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 Gul Ahmed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Petroleum and Gul Ahmed Textile, you can compare the effects of market volatilities on Pakistan Petroleum and Gul Ahmed 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 Gul Ahmed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Petroleum and Gul Ahmed.
Diversification Opportunities for Pakistan Petroleum and Gul Ahmed
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pakistan and Gul is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Petroleum and Gul Ahmed Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gul Ahmed Textile 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 Gul Ahmed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gul Ahmed Textile has no effect on the direction of Pakistan Petroleum i.e., Pakistan Petroleum and Gul Ahmed go up and down completely randomly.
Pair Corralation between Pakistan Petroleum and Gul Ahmed
Assuming the 90 days trading horizon Pakistan Petroleum is expected to generate 1.19 times more return on investment than Gul Ahmed. However, Pakistan Petroleum is 1.19 times more volatile than Gul Ahmed Textile. It trades about 0.11 of its potential returns per unit of risk. Gul Ahmed Textile is currently generating about 0.04 per unit of risk. If you would invest 4,956 in Pakistan Petroleum on September 12, 2024 and sell it today you would earn a total of 12,451 from holding Pakistan Petroleum or generate 251.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Petroleum vs. Gul Ahmed Textile
Performance |
| Timeline |
| Pakistan Petroleum |
| Gul Ahmed Textile |
Pakistan Petroleum and Gul Ahmed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Petroleum and Gul Ahmed
The main advantage of trading using opposite Pakistan Petroleum and Gul Ahmed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Petroleum position performs unexpectedly, Gul Ahmed 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 Gul Ahmed will offset losses from the drop in Gul Ahmed's long position.| Pakistan Petroleum vs. Masood Textile Mills | Pakistan Petroleum vs. Fauji Foods | Pakistan Petroleum vs. KSB Pumps | Pakistan Petroleum vs. Mari Petroleum |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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