Correlation Between Pakistan Petroleum and Pakistan Synthetics
Can any of the company-specific risk be diversified away by investing in both Pakistan Petroleum and Pakistan Synthetics 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 Synthetics 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 Synthetics, you can compare the effects of market volatilities on Pakistan Petroleum and Pakistan Synthetics 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 Synthetics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Petroleum and Pakistan Synthetics.
Diversification Opportunities for Pakistan Petroleum and Pakistan Synthetics
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pakistan and Pakistan is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Petroleum and Pakistan Synthetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Synthetics 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 Synthetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Synthetics has no effect on the direction of Pakistan Petroleum i.e., Pakistan Petroleum and Pakistan Synthetics go up and down completely randomly.
Pair Corralation between Pakistan Petroleum and Pakistan Synthetics
Assuming the 90 days trading horizon Pakistan Petroleum is expected to generate 2.36 times less return on investment than Pakistan Synthetics. But when comparing it to its historical volatility, Pakistan Petroleum is 1.13 times less risky than Pakistan Synthetics. It trades about 0.1 of its potential returns per unit of risk. Pakistan Synthetics is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,452 in Pakistan Synthetics on August 29, 2024 and sell it today you would earn a total of 348.00 from holding Pakistan Synthetics or generate 14.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Petroleum vs. Pakistan Synthetics
Performance |
| Timeline |
| Pakistan Petroleum |
| Pakistan Synthetics |
Pakistan Petroleum and Pakistan Synthetics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Petroleum and Pakistan Synthetics
The main advantage of trading using opposite Pakistan Petroleum and Pakistan Synthetics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Petroleum position performs unexpectedly, Pakistan Synthetics 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 Synthetics will offset losses from the drop in Pakistan Synthetics' long position.| Pakistan Petroleum vs. Al Ghazi Tractors | Pakistan Petroleum vs. Nestle Pakistan | Pakistan Petroleum vs. Hinopak Motors | Pakistan Petroleum vs. Abbott Laboratories Pakistan |
| Pakistan Synthetics vs. Masood Textile Mills | Pakistan Synthetics vs. Fauji Foods | Pakistan Synthetics vs. KSB Pumps | Pakistan Synthetics vs. Mari Petroleum |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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