Correlation Between Invest Capital and Pakistan Tobacco

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

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

Diversification Opportunities for Invest Capital and Pakistan Tobacco

0.12

Correlation Coefficient

Invest Capital  Pakistan Tobacco

Average diversification

The 3 months correlation between Invest and Pakistan is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Invest Capital Investment and Pakistan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Tobacco and Invest Capital 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 Invest Capital Investment are associated (or correlated) with Pakistan Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Tobacco has no effect on the direction of Invest Capital i.e., Invest Capital and Pakistan Tobacco go up and down completely randomly.

Pair Corralation between Invest Capital and Pakistan Tobacco

Assuming the 90 days trading horizon Invest Capital Investment is expected to generate 2.4 times more return on investment than Pakistan Tobacco. However, Invest Capital is 2.4 times more volatile than Pakistan Tobacco. It trades about -0.02 of its potential returns per unit of risk. Pakistan Tobacco is currently generating about -0.23 per unit of risk. If you would invest  166.00  in Invest Capital Investment on October 25, 2024 and sell it today you would lose (5.00) from holding Invest Capital Investment or give up 3.01% of portfolio value over 90 days.

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

Invest Capital Investment  vs.  Pakistan Tobacco

Invest Capital Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invest Capital Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Invest Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pakistan Tobacco

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Tobacco are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Pakistan Tobacco is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invest Capital and Pakistan Tobacco

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

The idea behind Invest Capital Investment and Pakistan Tobacco 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.