Correlation Between Askari Bank and Pakistan Telecommunicatio

Can any of the company-specific risk be diversified away by investing in both Askari Bank and Pakistan Telecommunicatio 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 Askari Bank and Pakistan Telecommunicatio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Askari Bank and Pakistan Telecommunication, you can compare the effects of market volatilities on Askari Bank and Pakistan Telecommunicatio 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 Askari Bank with a short position of Pakistan Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Askari Bank and Pakistan Telecommunicatio.

Diversification Opportunities for Askari Bank and Pakistan Telecommunicatio

0.92

Correlation Coefficient

Askari Bank  Pakistan Telecommunicatio

Almost no diversification

The 3 months correlation between Askari and Pakistan is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Askari Bank and Pakistan Telecommunication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Telecommunicatio and Askari Bank 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 Askari Bank are associated (or correlated) with Pakistan Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Telecommunicatio has no effect on the direction of Askari Bank i.e., Askari Bank and Pakistan Telecommunicatio go up and down completely randomly.

Pair Corralation between Askari Bank and Pakistan Telecommunicatio

Assuming the 90 days trading horizon Askari Bank is expected to generate 1.78 times less return on investment than Pakistan Telecommunicatio. But when comparing it to its historical volatility, Askari Bank is 1.5 times less risky than Pakistan Telecommunicatio. It trades about 0.28 of its potential returns per unit of risk. Pakistan Telecommunication is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  1,157  in Pakistan Telecommunication on September 15, 2024 and sell it today you would earn a total of  1,502  from holding Pakistan Telecommunication or generate 129.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Askari Bank  vs.  Pakistan Telecommunication

Askari Bank

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Askari Bank are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Askari Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pakistan Telecommunicatio

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Telecommunication are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Pakistan Telecommunicatio reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Askari Bank and Pakistan Telecommunicatio

The main advantage of trading using opposite Askari Bank and Pakistan Telecommunicatio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Askari Bank position performs unexpectedly, Pakistan Telecommunicatio 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 Telecommunicatio will offset losses from the drop in Pakistan Telecommunicatio's long position.

The idea behind Askari Bank and Pakistan Telecommunication 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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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.