Correlation Between ITTEFAQ Iron and Pakistan State

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

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

Diversification Opportunities for ITTEFAQ Iron and Pakistan State

0.15

Correlation Coefficient

ITTEFAQ Iron  Pakistan State

Average diversification

The 3 months correlation between ITTEFAQ and Pakistan is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding ITTEFAQ Iron Industries 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 ITTEFAQ Iron 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 ITTEFAQ Iron Industries 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 ITTEFAQ Iron i.e., ITTEFAQ Iron and Pakistan State go up and down completely randomly.

Pair Corralation between ITTEFAQ Iron and Pakistan State

Assuming the 90 days trading horizon ITTEFAQ Iron Industries is expected to generate 1.68 times more return on investment than Pakistan State. However, ITTEFAQ Iron is 1.68 times more volatile than Pakistan State Oil. It trades about 0.03 of its potential returns per unit of risk. Pakistan State Oil is currently generating about 0.01 per unit of risk. If you would invest  697.00  in ITTEFAQ Iron Industries on December 25, 2024 and sell it today you would earn a total of  21.00  from holding ITTEFAQ Iron Industries or generate 3.01% return on investment over 90 days.

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

ITTEFAQ Iron Industries  vs.  Pakistan State Oil

ITTEFAQ Iron Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ITTEFAQ Iron Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, ITTEFAQ Iron may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pakistan State Oil

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan State Oil are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Pakistan State is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ITTEFAQ Iron and Pakistan State

The main advantage of trading using opposite ITTEFAQ Iron and Pakistan State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITTEFAQ Iron 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 ITTEFAQ Iron Industries 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.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.