Correlation Between Pakistan Telecommunicatio and IBL HealthCare
Can any of the company-specific risk be diversified away by investing in both Pakistan Telecommunicatio and IBL HealthCare 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 IBL HealthCare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Telecommunication and IBL HealthCare, you can compare the effects of market volatilities on Pakistan Telecommunicatio and IBL HealthCare 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 IBL HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Telecommunicatio and IBL HealthCare.
Diversification Opportunities for Pakistan Telecommunicatio and IBL HealthCare
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pakistan and IBL is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Telecommunication and IBL HealthCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBL HealthCare 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 IBL HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBL HealthCare has no effect on the direction of Pakistan Telecommunicatio i.e., Pakistan Telecommunicatio and IBL HealthCare go up and down completely randomly.
Pair Corralation between Pakistan Telecommunicatio and IBL HealthCare
Assuming the 90 days trading horizon Pakistan Telecommunication is expected to under-perform the IBL HealthCare. But the stock apears to be less risky and, when comparing its historical volatility, Pakistan Telecommunication is 1.19 times less risky than IBL HealthCare. The stock trades about -0.03 of its potential returns per unit of risk. The IBL HealthCare is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,092 in IBL HealthCare on October 21, 2024 and sell it today you would earn a total of 187.00 from holding IBL HealthCare or generate 4.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Telecommunication vs. IBL HealthCare
Performance |
| Timeline |
| Pakistan Telecommunicatio |
| IBL HealthCare |
Pakistan Telecommunicatio and IBL HealthCare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Telecommunicatio and IBL HealthCare
The main advantage of trading using opposite Pakistan Telecommunicatio and IBL HealthCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Telecommunicatio position performs unexpectedly, IBL HealthCare 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 IBL HealthCare will offset losses from the drop in IBL HealthCare's long position.The idea behind Pakistan Telecommunication and IBL HealthCare 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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