Correlation Between Astar and Pakistan Oilfields

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

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

Diversification Opportunities for Astar and Pakistan Oilfields

-0.03

Correlation Coefficient

Astar  Pakistan Oilfields

Good diversification

The 3 months correlation between Astar and Pakistan is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Astar and Pakistan Oilfields in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Oilfields and Astar 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 Astar are associated (or correlated) with Pakistan Oilfields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Oilfields has no effect on the direction of Astar i.e., Astar and Pakistan Oilfields go up and down completely randomly.

Pair Corralation between Astar and Pakistan Oilfields

Assuming the 90 days trading horizon Astar is expected to generate 5.3 times more return on investment than Pakistan Oilfields. However, Astar is 5.3 times more volatile than Pakistan Oilfields. It trades about 0.04 of its potential returns per unit of risk. Pakistan Oilfields is currently generating about 0.12 per unit of risk. If you would invest  4.50  in Astar on October 24, 2024 and sell it today you would earn a total of  1.02  from holding Astar or generate 22.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	49.48%
Values	Daily Returns

Astar  vs.  Pakistan Oilfields

Astar

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Astar are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Astar may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pakistan Oilfields

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Oilfields are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Pakistan Oilfields reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Astar and Pakistan Oilfields

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

The idea behind Astar and Pakistan Oilfields 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.

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.