Correlation Between Sitara Chemical and Pakistan Tobacco
Can any of the company-specific risk be diversified away by investing in both Sitara Chemical and Pakistan Tobacco 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 Sitara Chemical and Pakistan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sitara Chemical Industries and Pakistan Tobacco, you can compare the effects of market volatilities on Sitara Chemical and Pakistan Tobacco 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 Sitara Chemical with a short position of Pakistan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sitara Chemical and Pakistan Tobacco.
Diversification Opportunities for Sitara Chemical and Pakistan Tobacco
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sitara and Pakistan is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sitara Chemical Industries and Pakistan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Tobacco and Sitara Chemical 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 Sitara Chemical Industries are associated (or correlated) with Pakistan Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Tobacco has no effect on the direction of Sitara Chemical i.e., Sitara Chemical and Pakistan Tobacco go up and down completely randomly.
Pair Corralation between Sitara Chemical and Pakistan Tobacco
Assuming the 90 days trading horizon Sitara Chemical Industries is expected to generate 2.62 times more return on investment than Pakistan Tobacco. However, Sitara Chemical is 2.62 times more volatile than Pakistan Tobacco. It trades about -0.04 of its potential returns per unit of risk. Pakistan Tobacco is currently generating about -0.19 per unit of risk. If you would invest 32,300 in Sitara Chemical Industries on November 5, 2024 and sell it today you would lose (789.00) from holding Sitara Chemical Industries or give up 2.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Sitara Chemical Industries vs. Pakistan Tobacco
Performance |
| Timeline |
| Sitara Chemical Indu |
| Pakistan Tobacco |
Sitara Chemical and Pakistan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sitara Chemical and Pakistan Tobacco
The main advantage of trading using opposite Sitara Chemical and Pakistan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sitara Chemical position performs unexpectedly, Pakistan Tobacco 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 Tobacco will offset losses from the drop in Pakistan Tobacco's long position.| Sitara Chemical vs. Pakistan Tobacco | Sitara Chemical vs. Data Agro | Sitara Chemical vs. Century Insurance | Sitara Chemical vs. Oil and Gas |
| Pakistan Tobacco vs. Big Bird Foods | Pakistan Tobacco vs. WorldCall Telecom | Pakistan Tobacco vs. Unity Foods | Pakistan Tobacco vs. Sitara Chemical Industries |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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