Correlation Between Jubilee Life and Pakistan Synthetics

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

Diversification Opportunities for Jubilee Life and Pakistan Synthetics

-0.52

Correlation Coefficient

Jubilee Life  Pakistan Synthetics

Excellent diversification

The 3 months correlation between Jubilee and Pakistan is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Jubilee Life Insurance and Pakistan Synthetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Synthetics 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 Synthetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Synthetics has no effect on the direction of Jubilee Life i.e., Jubilee Life and Pakistan Synthetics go up and down completely randomly.

Pair Corralation between Jubilee Life and Pakistan Synthetics

Assuming the 90 days trading horizon Jubilee Life Insurance is expected to under-perform the Pakistan Synthetics. But the stock apears to be less risky and, when comparing its historical volatility, Jubilee Life Insurance is 1.6 times less risky than Pakistan Synthetics. The stock trades about -0.05 of its potential returns per unit of risk. The Pakistan Synthetics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,638  in Pakistan Synthetics on December 25, 2024 and sell it today you would earn a total of  538.00  from holding Pakistan Synthetics or generate 14.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Jubilee Life Insurance  vs.  Pakistan Synthetics

Jubilee Life Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jubilee Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pakistan Synthetics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Synthetics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pakistan Synthetics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jubilee Life and Pakistan Synthetics

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

The idea behind Jubilee Life Insurance and Pakistan Synthetics 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.