Correlation Between Jubilee Life and Pakistan State

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

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

Diversification Opportunities for Jubilee Life and Pakistan State

0.68

Correlation Coefficient

Jubilee Life  Pakistan State

Poor diversification

The 3 months correlation between Jubilee and Pakistan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Jubilee Life Insurance 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 Jubilee Life 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 Jubilee Life Insurance 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 Jubilee Life i.e., Jubilee Life and Pakistan State go up and down completely randomly.

Pair Corralation between Jubilee Life and Pakistan State

Assuming the 90 days trading horizon Jubilee Life is expected to generate 2.19 times less return on investment than Pakistan State. But when comparing it to its historical volatility, Jubilee Life Insurance is 1.27 times less risky than Pakistan State. It trades about 0.03 of its potential returns per unit of risk. Pakistan State Oil is currently generating about 0.05 of returns per unit of risk over similar time horizon. 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 Together
Strength	Significant
Accuracy	95.08%
Values	Daily Returns

Jubilee Life Insurance  vs.  Pakistan State Oil

Jubilee Life Insurance

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jubilee Life Insurance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, Jubilee Life is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the 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 Jubilee Life and Pakistan State

The main advantage of trading using opposite Jubilee Life and Pakistan State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jubilee Life 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 Jubilee Life Insurance 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.