Correlation Between Pakistan Petroleum and Metropolitan Steel
Can any of the company-specific risk be diversified away by investing in both Pakistan Petroleum and Metropolitan Steel 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 Metropolitan Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Petroleum and Metropolitan Steel Corp, you can compare the effects of market volatilities on Pakistan Petroleum and Metropolitan Steel 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 Metropolitan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Petroleum and Metropolitan Steel.
Diversification Opportunities for Pakistan Petroleum and Metropolitan Steel
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pakistan and Metropolitan is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Petroleum and Metropolitan Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan Steel Corp 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 Metropolitan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan Steel Corp has no effect on the direction of Pakistan Petroleum i.e., Pakistan Petroleum and Metropolitan Steel go up and down completely randomly.
Pair Corralation between Pakistan Petroleum and Metropolitan Steel
Assuming the 90 days trading horizon Pakistan Petroleum is expected to generate 0.61 times more return on investment than Metropolitan Steel. However, Pakistan Petroleum is 1.65 times less risky than Metropolitan Steel. It trades about 0.09 of its potential returns per unit of risk. Metropolitan Steel Corp is currently generating about -0.04 per unit of risk. If you would invest 6,966 in Pakistan Petroleum on November 5, 2024 and sell it today you would earn a total of 10,925 from holding Pakistan Petroleum or generate 156.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 59.63% |
| Values | Daily Returns |
Pakistan Petroleum vs. Metropolitan Steel Corp
Performance |
| Timeline |
| Pakistan Petroleum |
| Metropolitan Steel Corp |
Pakistan Petroleum and Metropolitan Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Petroleum and Metropolitan Steel
The main advantage of trading using opposite Pakistan Petroleum and Metropolitan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Petroleum position performs unexpectedly, Metropolitan Steel 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 Metropolitan Steel will offset losses from the drop in Metropolitan Steel's long position.| Pakistan Petroleum vs. 786 Investment Limited | Pakistan Petroleum vs. Crescent Steel Allied | Pakistan Petroleum vs. ITTEFAQ Iron Industries | Pakistan Petroleum vs. Sindh Modaraba Management |
| Metropolitan Steel vs. Askari General Insurance | Metropolitan Steel vs. Air Link Communication | Metropolitan Steel vs. Adamjee Insurance | Metropolitan Steel vs. Pakistan Aluminium Beverage |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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