Correlation Between Pakistan Synthetics and Towellers
Can any of the company-specific risk be diversified away by investing in both Pakistan Synthetics and Towellers 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 Synthetics and Towellers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Synthetics and Towellers, you can compare the effects of market volatilities on Pakistan Synthetics and Towellers 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 Synthetics with a short position of Towellers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Synthetics and Towellers.
Diversification Opportunities for Pakistan Synthetics and Towellers
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Pakistan and Towellers is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Synthetics and Towellers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Towellers and Pakistan Synthetics 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 Synthetics are associated (or correlated) with Towellers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Towellers has no effect on the direction of Pakistan Synthetics i.e., Pakistan Synthetics and Towellers go up and down completely randomly.
Pair Corralation between Pakistan Synthetics and Towellers
Assuming the 90 days trading horizon Pakistan Synthetics is expected to under-perform the Towellers. In addition to that, Pakistan Synthetics is 1.54 times more volatile than Towellers. It trades about -0.02 of its total potential returns per unit of risk. Towellers is currently generating about 0.09 per unit of volatility. If you would invest 12,749 in Towellers on September 2, 2024 and sell it today you would earn a total of 1,506 from holding Towellers or generate 11.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.92% |
| Values | Daily Returns |
Pakistan Synthetics vs. Towellers
Performance |
| Timeline |
| Pakistan Synthetics |
| Towellers |
Pakistan Synthetics and Towellers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Synthetics and Towellers
The main advantage of trading using opposite Pakistan Synthetics and Towellers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Synthetics position performs unexpectedly, Towellers 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 Towellers will offset losses from the drop in Towellers' long position.| Pakistan Synthetics vs. Masood Textile Mills | Pakistan Synthetics vs. Fauji Foods | Pakistan Synthetics vs. KSB Pumps | Pakistan Synthetics vs. Mari Petroleum |
| Towellers vs. Pakistan Telecommunication | Towellers vs. ORIX Leasing Pakistan | Towellers vs. IBL HealthCare | Towellers vs. Murree Brewery |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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