Correlation Between Bawany Air and Pakistan Hotel

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

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

Diversification Opportunities for Bawany Air and Pakistan Hotel

0.77

Correlation Coefficient

Bawany Air  Pakistan Hotel

Poor diversification

The 3 months correlation between Bawany and Pakistan is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bawany Air Products and Pakistan Hotel Developers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Hotel Developers and Bawany Air 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 Bawany Air Products are associated (or correlated) with Pakistan Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Hotel Developers has no effect on the direction of Bawany Air i.e., Bawany Air and Pakistan Hotel go up and down completely randomly.

Pair Corralation between Bawany Air and Pakistan Hotel

Assuming the 90 days trading horizon Bawany Air is expected to generate 2.03 times less return on investment than Pakistan Hotel. In addition to that, Bawany Air is 1.15 times more volatile than Pakistan Hotel Developers. It trades about 0.05 of its total potential returns per unit of risk. Pakistan Hotel Developers is currently generating about 0.12 per unit of volatility. If you would invest  4,048  in Pakistan Hotel Developers on October 26, 2024 and sell it today you would earn a total of  992.00  from holding Pakistan Hotel Developers or generate 24.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

Bawany Air Products  vs.  Pakistan Hotel Developers

Bawany Air Products

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bawany Air Products are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bawany Air sustained solid returns over the last few months and may actually be approaching a breakup point.

Pakistan Hotel Developers

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Hotel Developers are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pakistan Hotel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bawany Air and Pakistan Hotel

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

The idea behind Bawany Air Products and Pakistan Hotel Developers 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.