Correlation Between Ashfaq Textile and Pak Datacom

Can any of the company-specific risk be diversified away by investing in both Ashfaq Textile and Pak Datacom 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 Ashfaq Textile and Pak Datacom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ashfaq Textile Mills and Pak Datacom, you can compare the effects of market volatilities on Ashfaq Textile and Pak Datacom 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 Ashfaq Textile with a short position of Pak Datacom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ashfaq Textile and Pak Datacom.

Diversification Opportunities for Ashfaq Textile and Pak Datacom

-0.21

Correlation Coefficient

Ashfaq Textile  Pak Datacom

Very good diversification

The 3 months correlation between Ashfaq and Pak is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ashfaq Textile Mills and Pak Datacom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pak Datacom and Ashfaq Textile 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 Ashfaq Textile Mills are associated (or correlated) with Pak Datacom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pak Datacom has no effect on the direction of Ashfaq Textile i.e., Ashfaq Textile and Pak Datacom go up and down completely randomly.

Pair Corralation between Ashfaq Textile and Pak Datacom

Assuming the 90 days trading horizon Ashfaq Textile Mills is expected to generate 0.73 times more return on investment than Pak Datacom. However, Ashfaq Textile Mills is 1.36 times less risky than Pak Datacom. It trades about 0.28 of its potential returns per unit of risk. Pak Datacom is currently generating about -0.12 per unit of risk. If you would invest  1,149  in Ashfaq Textile Mills on December 23, 2024 and sell it today you would earn a total of  433.00  from holding Ashfaq Textile Mills or generate 37.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	63.49%
Values	Daily Returns

Ashfaq Textile Mills  vs.  Pak Datacom

Ashfaq Textile Mills

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ashfaq Textile Mills are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Ashfaq Textile sustained solid returns over the last few months and may actually be approaching a breakup point.

Pak Datacom

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pak Datacom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ashfaq Textile and Pak Datacom

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

The idea behind Ashfaq Textile Mills and Pak Datacom 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.