Correlation Between Pakistan State and Thatta Cement
Can any of the company-specific risk be diversified away by investing in both Pakistan State and Thatta Cement 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 Thatta Cement 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 Thatta Cement, you can compare the effects of market volatilities on Pakistan State and Thatta Cement 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 Thatta Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan State and Thatta Cement.
Diversification Opportunities for Pakistan State and Thatta Cement
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pakistan and Thatta is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan State Oil and Thatta Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thatta Cement 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 Thatta Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thatta Cement has no effect on the direction of Pakistan State i.e., Pakistan State and Thatta Cement go up and down completely randomly.
Pair Corralation between Pakistan State and Thatta Cement
Assuming the 90 days trading horizon Pakistan State is expected to generate 1.07 times less return on investment than Thatta Cement. But when comparing it to its historical volatility, Pakistan State Oil is 1.7 times less risky than Thatta Cement. It trades about 0.42 of its potential returns per unit of risk. Thatta Cement is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 11,418 in Thatta Cement on August 25, 2024 and sell it today you would earn a total of 3,564 from holding Thatta Cement or generate 31.21% 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. Thatta Cement
Performance |
| Timeline |
| Pakistan State Oil |
| Thatta Cement |
Pakistan State and Thatta Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan State and Thatta Cement
The main advantage of trading using opposite Pakistan State and Thatta Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan State position performs unexpectedly, Thatta Cement 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 Thatta Cement will offset losses from the drop in Thatta Cement's long position.| Pakistan State vs. Al Ghazi Tractors | Pakistan State vs. Shell Pakistan | Pakistan State vs. Nestle Pakistan | Pakistan State vs. National Refinery |
| Thatta Cement vs. Nimir Industrial Chemical | Thatta Cement vs. Century Insurance | Thatta Cement vs. Jubilee Life Insurance | Thatta Cement vs. United 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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