Correlation Between Pakistan State and Pakistan Petroleum
Can any of the company-specific risk be diversified away by investing in both Pakistan State and Pakistan Petroleum 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 State and Pakistan Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan State Oil and Pakistan Petroleum, you can compare the effects of market volatilities on Pakistan State and Pakistan Petroleum 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 State with a short position of Pakistan Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan State and Pakistan Petroleum.
Diversification Opportunities for Pakistan State and Pakistan Petroleum
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Pakistan and Pakistan is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan State Oil and Pakistan Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Petroleum and Pakistan State 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 State Oil are associated (or correlated) with Pakistan Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Petroleum has no effect on the direction of Pakistan State i.e., Pakistan State and Pakistan Petroleum go up and down completely randomly.
Pair Corralation between Pakistan State and Pakistan Petroleum
Assuming the 90 days trading horizon Pakistan State Oil is expected to generate 1.1 times more return on investment than Pakistan Petroleum. However, Pakistan State is 1.1 times more volatile than Pakistan Petroleum. It trades about 0.32 of its potential returns per unit of risk. Pakistan Petroleum is currently generating about 0.28 per unit of risk. If you would invest 23,397 in Pakistan State Oil on August 28, 2024 and sell it today you would earn a total of 3,988 from holding Pakistan State Oil or generate 17.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan State Oil vs. Pakistan Petroleum
Performance |
| Timeline |
| Pakistan State Oil |
| Pakistan Petroleum |
Pakistan State and Pakistan Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan State and Pakistan Petroleum
The main advantage of trading using opposite Pakistan State and Pakistan Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan State position performs unexpectedly, Pakistan Petroleum 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 Petroleum will offset losses from the drop in Pakistan Petroleum's long position.| Pakistan State vs. Soneri Bank | Pakistan State vs. Synthetic Products Enterprises | Pakistan State vs. Bank of Punjab | Pakistan State vs. Sardar Chemical Industries |
| Pakistan Petroleum vs. Avanceon | Pakistan Petroleum vs. Escorts Investment Bank | Pakistan Petroleum vs. NetSol Technologies | Pakistan Petroleum vs. Adamjee Insurance |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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