Correlation Between JS Investments and Pakistan Cables

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

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

Diversification Opportunities for JS Investments and Pakistan Cables

0.36

Correlation Coefficient

JS Investments  Pakistan Cables

Weak diversification

The 3 months correlation between JSIL and Pakistan is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding JS Investments and Pakistan Cables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Cables and JS Investments 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 JS Investments are associated (or correlated) with Pakistan Cables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Cables has no effect on the direction of JS Investments i.e., JS Investments and Pakistan Cables go up and down completely randomly.

Pair Corralation between JS Investments and Pakistan Cables

Assuming the 90 days trading horizon JS Investments is expected to under-perform the Pakistan Cables. But the stock apears to be less risky and, when comparing its historical volatility, JS Investments is 1.34 times less risky than Pakistan Cables. The stock trades about -0.09 of its potential returns per unit of risk. The Pakistan Cables is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  13,910  in Pakistan Cables on October 5, 2024 and sell it today you would earn a total of  3,501  from holding Pakistan Cables or generate 25.17% return on investment over 90 days.

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

JS Investments  vs.  Pakistan Cables

JS Investments

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JS Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JS Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Pakistan Cables

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Cables are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pakistan Cables sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JS Investments and Pakistan Cables

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

The idea behind JS Investments and Pakistan Cables 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.