Correlation Between Pakistan Petroleum and United Insurance
Can any of the company-specific risk be diversified away by investing in both Pakistan Petroleum and United Insurance 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 United Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Petroleum and United Insurance, you can compare the effects of market volatilities on Pakistan Petroleum and United Insurance 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 United Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Petroleum and United Insurance.
Diversification Opportunities for Pakistan Petroleum and United Insurance
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pakistan and United is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Petroleum and United Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Insurance 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 United Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Insurance has no effect on the direction of Pakistan Petroleum i.e., Pakistan Petroleum and United Insurance go up and down completely randomly.
Pair Corralation between Pakistan Petroleum and United Insurance
Assuming the 90 days trading horizon Pakistan Petroleum is expected to generate 3.57 times more return on investment than United Insurance. However, Pakistan Petroleum is 3.57 times more volatile than United Insurance. It trades about 0.25 of its potential returns per unit of risk. United Insurance is currently generating about 0.09 per unit of risk. If you would invest 14,541 in Pakistan Petroleum on September 3, 2024 and sell it today you would earn a total of 2,261 from holding Pakistan Petroleum or generate 15.55% 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. United Insurance
Performance |
| Timeline |
| Pakistan Petroleum |
| United Insurance |
Pakistan Petroleum and United Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Petroleum and United Insurance
The main advantage of trading using opposite Pakistan Petroleum and United Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Petroleum position performs unexpectedly, United Insurance 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 United Insurance will offset losses from the drop in United Insurance's long position.| Pakistan Petroleum vs. Jubilee Life Insurance | Pakistan Petroleum vs. JS Global Banking | Pakistan Petroleum vs. Air Link Communication | Pakistan Petroleum vs. Soneri Bank |
| United Insurance vs. Oil and Gas | United Insurance vs. Pakistan State Oil | United Insurance vs. Pakistan Petroleum | United Insurance 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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