Correlation Between Pakistan Refinery and Beco Steel
Can any of the company-specific risk be diversified away by investing in both Pakistan Refinery and Beco 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 Refinery and Beco Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Refinery and Beco Steel, you can compare the effects of market volatilities on Pakistan Refinery and Beco 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 Refinery with a short position of Beco Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Refinery and Beco Steel.
Diversification Opportunities for Pakistan Refinery and Beco Steel
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pakistan and Beco is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Refinery and Beco Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beco Steel and Pakistan Refinery 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 Refinery are associated (or correlated) with Beco Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beco Steel has no effect on the direction of Pakistan Refinery i.e., Pakistan Refinery and Beco Steel go up and down completely randomly.
Pair Corralation between Pakistan Refinery and Beco Steel
Assuming the 90 days trading horizon Pakistan Refinery is expected to generate 1.55 times more return on investment than Beco Steel. However, Pakistan Refinery is 1.55 times more volatile than Beco Steel. It trades about 0.21 of its potential returns per unit of risk. Beco Steel is currently generating about -0.07 per unit of risk. If you would invest 2,316 in Pakistan Refinery on September 3, 2024 and sell it today you would earn a total of 303.00 from holding Pakistan Refinery or generate 13.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Refinery vs. Beco Steel
Performance |
| Timeline |
| Pakistan Refinery |
| Beco Steel |
Pakistan Refinery and Beco Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Refinery and Beco Steel
The main advantage of trading using opposite Pakistan Refinery and Beco Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Refinery position performs unexpectedly, Beco 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 Beco Steel will offset losses from the drop in Beco Steel's long position.| Pakistan Refinery vs. Roshan Packages | Pakistan Refinery vs. Crescent Star Insurance | Pakistan Refinery vs. East West Insurance | Pakistan Refinery vs. United Insurance |
| Beco Steel vs. Habib Insurance | Beco Steel vs. Pakistan Refinery | Beco Steel vs. Century Insurance | Beco Steel vs. Al Khair Gadoon Limited |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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