Correlation Between TPL Insurance and Pakistan Engineering
Can any of the company-specific risk be diversified away by investing in both TPL Insurance and Pakistan Engineering 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 TPL Insurance and Pakistan Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TPL Insurance and Pakistan Engineering, you can compare the effects of market volatilities on TPL Insurance and Pakistan Engineering 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 TPL Insurance with a short position of Pakistan Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of TPL Insurance and Pakistan Engineering.
Diversification Opportunities for TPL Insurance and Pakistan Engineering
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between TPL and Pakistan is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding TPL Insurance and Pakistan Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Engineering and TPL Insurance 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 TPL Insurance are associated (or correlated) with Pakistan Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Engineering has no effect on the direction of TPL Insurance i.e., TPL Insurance and Pakistan Engineering go up and down completely randomly.
Pair Corralation between TPL Insurance and Pakistan Engineering
Assuming the 90 days trading horizon TPL Insurance is expected to generate 23.28 times less return on investment than Pakistan Engineering. But when comparing it to its historical volatility, TPL Insurance is 1.4 times less risky than Pakistan Engineering. It trades about 0.0 of its potential returns per unit of risk. Pakistan Engineering is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 61,964 in Pakistan Engineering on November 3, 2024 and sell it today you would earn a total of 13,320 from holding Pakistan Engineering or generate 21.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.36% |
| Values | Daily Returns |
TPL Insurance vs. Pakistan Engineering
Performance |
| Timeline |
| TPL Insurance |
| Pakistan Engineering |
TPL Insurance and Pakistan Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TPL Insurance and Pakistan Engineering
The main advantage of trading using opposite TPL Insurance and Pakistan Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TPL Insurance position performs unexpectedly, Pakistan Engineering 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 Engineering will offset losses from the drop in Pakistan Engineering's long position.| TPL Insurance vs. Universal Insurance | TPL Insurance vs. Data Agro | TPL Insurance vs. Adamjee Insurance | TPL Insurance vs. Supernet Technologie |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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