Correlation Between Invest Capital and Pakistan State

Can any of the company-specific risk be diversified away by investing in both Invest Capital and Pakistan State 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 State 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 State Oil, you can compare the effects of market volatilities on Invest Capital and Pakistan State 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 State. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invest Capital and Pakistan State.

Diversification Opportunities for Invest Capital and Pakistan State

-0.25

Correlation Coefficient

Invest Capital  Pakistan State

Very good diversification

The 3 months correlation between Invest and Pakistan is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Invest Capital Investment and Pakistan State Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan State Oil 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 State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan State Oil has no effect on the direction of Invest Capital i.e., Invest Capital and Pakistan State go up and down completely randomly.

Pair Corralation between Invest Capital and Pakistan State

Assuming the 90 days trading horizon Invest Capital Investment is expected to under-perform the Pakistan State. In addition to that, Invest Capital is 1.2 times more volatile than Pakistan State Oil. It trades about -0.07 of its total potential returns per unit of risk. Pakistan State Oil is currently generating about 0.05 per unit of volatility. If you would invest  30,799  in Pakistan State Oil on December 4, 2024 and sell it today you would earn a total of  2,261  from holding Pakistan State Oil or generate 7.34% return on investment over 90 days.

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

Invest Capital Investment  vs.  Pakistan State Oil

Invest Capital Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invest Capital Investment 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 forward indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pakistan State Oil

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan State Oil are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Pakistan State may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Invest Capital and Pakistan State

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

The idea behind Invest Capital Investment and Pakistan State Oil 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.