Correlation Between Silkbank and Pakistan Reinsurance
Can any of the company-specific risk be diversified away by investing in both Silkbank and Pakistan Reinsurance 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 Silkbank and Pakistan Reinsurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Silkbank and Pakistan Reinsurance, you can compare the effects of market volatilities on Silkbank and Pakistan Reinsurance 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 Silkbank with a short position of Pakistan Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silkbank and Pakistan Reinsurance.
Diversification Opportunities for Silkbank and Pakistan Reinsurance
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Silkbank and Pakistan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Silkbank and Pakistan Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Reinsurance and Silkbank 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 Silkbank are associated (or correlated) with Pakistan Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Reinsurance has no effect on the direction of Silkbank i.e., Silkbank and Pakistan Reinsurance go up and down completely randomly.
Pair Corralation between Silkbank and Pakistan Reinsurance
Assuming the 90 days trading horizon Silkbank is expected to generate 1.41 times more return on investment than Pakistan Reinsurance. However, Silkbank is 1.41 times more volatile than Pakistan Reinsurance. It trades about -0.09 of its potential returns per unit of risk. Pakistan Reinsurance is currently generating about -0.2 per unit of risk. If you would invest 104.00 in Silkbank on November 4, 2024 and sell it today you would lose (4.00) from holding Silkbank or give up 3.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Silkbank vs. Pakistan Reinsurance
Performance |
| Timeline |
| Silkbank |
| Pakistan Reinsurance |
Silkbank and Pakistan Reinsurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silkbank and Pakistan Reinsurance
The main advantage of trading using opposite Silkbank and Pakistan Reinsurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silkbank position performs unexpectedly, Pakistan Reinsurance 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 Pakistan Reinsurance will offset losses from the drop in Pakistan Reinsurance's long position.| Silkbank vs. Data Agro | Silkbank vs. IBL HealthCare | Silkbank vs. Air Link Communication | Silkbank vs. Ittehad Chemicals |
| Pakistan Reinsurance vs. Fateh Sports Wear | Pakistan Reinsurance vs. Agritech | Pakistan Reinsurance vs. Air Link Communication | Pakistan Reinsurance vs. Data Agro |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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