Correlation Between Pakistan Telecommunicatio and Habib Metropolitan
Can any of the company-specific risk be diversified away by investing in both Pakistan Telecommunicatio and Habib Metropolitan 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 Habib Metropolitan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Telecommunication and Habib Metropolitan Bank, you can compare the effects of market volatilities on Pakistan Telecommunicatio and Habib Metropolitan 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 Habib Metropolitan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Telecommunicatio and Habib Metropolitan.
Diversification Opportunities for Pakistan Telecommunicatio and Habib Metropolitan
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pakistan and Habib is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Telecommunication and Habib Metropolitan Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Metropolitan Bank 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 Habib Metropolitan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Metropolitan Bank has no effect on the direction of Pakistan Telecommunicatio i.e., Pakistan Telecommunicatio and Habib Metropolitan go up and down completely randomly.
Pair Corralation between Pakistan Telecommunicatio and Habib Metropolitan
Assuming the 90 days trading horizon Pakistan Telecommunication is expected to generate 1.66 times more return on investment than Habib Metropolitan. However, Pakistan Telecommunicatio is 1.66 times more volatile than Habib Metropolitan Bank. It trades about 0.5 of its potential returns per unit of risk. Habib Metropolitan Bank is currently generating about 0.31 per unit of risk. If you would invest 1,607 in Pakistan Telecommunication on September 14, 2024 and sell it today you would earn a total of 1,114 from holding Pakistan Telecommunication or generate 69.32% 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. Habib Metropolitan Bank
Performance |
| Timeline |
| Pakistan Telecommunicatio |
| Habib Metropolitan Bank |
Pakistan Telecommunicatio and Habib Metropolitan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Telecommunicatio and Habib Metropolitan
The main advantage of trading using opposite Pakistan Telecommunicatio and Habib Metropolitan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Telecommunicatio position performs unexpectedly, Habib Metropolitan 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 Habib Metropolitan will offset losses from the drop in Habib Metropolitan's long position.The idea behind Pakistan Telecommunication and Habib Metropolitan Bank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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