Correlation Between Pakistan Telecommunicatio and Bank of Punjab
Can any of the company-specific risk be diversified away by investing in both Pakistan Telecommunicatio and Bank of Punjab 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 Telecommunicatio and Bank of Punjab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Telecommunication and Bank of Punjab, you can compare the effects of market volatilities on Pakistan Telecommunicatio and Bank of Punjab 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 Telecommunicatio with a short position of Bank of Punjab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Telecommunicatio and Bank of Punjab.
Diversification Opportunities for Pakistan Telecommunicatio and Bank of Punjab
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pakistan and Bank is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Telecommunication and Bank of Punjab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Punjab and Pakistan Telecommunicatio 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 Telecommunication are associated (or correlated) with Bank of Punjab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Punjab has no effect on the direction of Pakistan Telecommunicatio i.e., Pakistan Telecommunicatio and Bank of Punjab go up and down completely randomly.
Pair Corralation between Pakistan Telecommunicatio and Bank of Punjab
Assuming the 90 days trading horizon Pakistan Telecommunication is expected to generate 1.22 times more return on investment than Bank of Punjab. However, Pakistan Telecommunicatio is 1.22 times more volatile than Bank of Punjab. It trades about 0.1 of its potential returns per unit of risk. Bank of Punjab is currently generating about 0.08 per unit of risk. If you would invest 579.00 in Pakistan Telecommunication on August 24, 2024 and sell it today you would earn a total of 1,171 from holding Pakistan Telecommunication or generate 202.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Telecommunication vs. Bank of Punjab
Performance |
| Timeline |
| Pakistan Telecommunicatio |
| Bank of Punjab |
Pakistan Telecommunicatio and Bank of Punjab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Telecommunicatio and Bank of Punjab
The main advantage of trading using opposite Pakistan Telecommunicatio and Bank of Punjab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Telecommunicatio position performs unexpectedly, Bank of Punjab 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 Bank of Punjab will offset losses from the drop in Bank of Punjab's long position.| Pakistan Telecommunicatio vs. Masood Textile Mills | Pakistan Telecommunicatio vs. Fauji Foods | Pakistan Telecommunicatio vs. KSB Pumps | Pakistan Telecommunicatio vs. Mari Petroleum |
| Bank of Punjab vs. Habib Bank | Bank of Punjab vs. National Bank of | Bank of Punjab vs. MCB Bank | Bank of Punjab vs. Allied Bank |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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