Correlation Between Pakistan State and TPL Insurance
Can any of the company-specific risk be diversified away by investing in both Pakistan State and TPL 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 State and TPL Insurance 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 TPL Insurance, you can compare the effects of market volatilities on Pakistan State and TPL 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 State with a short position of TPL Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan State and TPL Insurance.
Diversification Opportunities for Pakistan State and TPL Insurance
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Pakistan and TPL is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan State Oil and TPL Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPL Insurance 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 TPL Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPL Insurance has no effect on the direction of Pakistan State i.e., Pakistan State and TPL Insurance go up and down completely randomly.
Pair Corralation between Pakistan State and TPL Insurance
Assuming the 90 days trading horizon Pakistan State Oil is expected to generate 0.87 times more return on investment than TPL Insurance. However, Pakistan State Oil is 1.15 times less risky than TPL Insurance. It trades about 0.09 of its potential returns per unit of risk. TPL Insurance is currently generating about -0.01 per unit of risk. If you would invest 11,656 in Pakistan State Oil on September 12, 2024 and sell it today you would earn a total of 18,211 from holding Pakistan State Oil or generate 156.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.04% |
| Values | Daily Returns |
Pakistan State Oil vs. TPL Insurance
Performance |
| Timeline |
| Pakistan State Oil |
| TPL Insurance |
Pakistan State and TPL Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan State and TPL Insurance
The main advantage of trading using opposite Pakistan State and TPL Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan State position performs unexpectedly, TPL 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 TPL Insurance will offset losses from the drop in TPL Insurance's long position.| Pakistan State vs. JS Global Banking | Pakistan State vs. Pakistan Hotel Developers | Pakistan State vs. Engro Polymer Chemicals | Pakistan State vs. Air Link Communication |
| TPL Insurance vs. Masood Textile Mills | TPL Insurance vs. Fauji Foods | TPL Insurance vs. KSB Pumps | TPL Insurance 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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