Correlation Between Pakistan Petroleum and Pakistan State
Can any of the company-specific risk be diversified away by investing in both Pakistan Petroleum and Pakistan State 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 Pakistan State into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Petroleum and Pakistan State Oil, you can compare the effects of market volatilities on Pakistan Petroleum and Pakistan State 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 Pakistan State. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Petroleum and Pakistan State.
Diversification Opportunities for Pakistan Petroleum and Pakistan State
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pakistan and Pakistan is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Petroleum and Pakistan State Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan State Oil 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 Pakistan State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan State Oil has no effect on the direction of Pakistan Petroleum i.e., Pakistan Petroleum and Pakistan State go up and down completely randomly.
Pair Corralation between Pakistan Petroleum and Pakistan State
Assuming the 90 days trading horizon Pakistan Petroleum is expected to generate 0.9 times more return on investment than Pakistan State. However, Pakistan Petroleum is 1.12 times less risky than Pakistan State. It trades about -0.1 of its potential returns per unit of risk. Pakistan State Oil is currently generating about -0.17 per unit of risk. If you would invest 19,166 in Pakistan Petroleum on October 26, 2024 and sell it today you would lose (931.00) from holding Pakistan Petroleum or give up 4.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Petroleum vs. Pakistan State Oil
Performance |
| Timeline |
| Pakistan Petroleum |
| Pakistan State Oil |
Pakistan Petroleum and Pakistan State Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Petroleum and Pakistan State
The main advantage of trading using opposite Pakistan Petroleum and Pakistan State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Petroleum position performs unexpectedly, Pakistan State 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 Pakistan State will offset losses from the drop in Pakistan State's long position.| Pakistan Petroleum vs. Metropolitan Steel Corp | Pakistan Petroleum vs. Pakistan Synthetics | Pakistan Petroleum vs. Air Link Communication | Pakistan Petroleum vs. Synthetic Products Enterprises |
| Pakistan State vs. Ittehad Chemicals | Pakistan State vs. Avanceon | Pakistan State vs. JS Investments | Pakistan State vs. National Foods |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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