Correlation Between KOT Addu and Pakistan Oilfields

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

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

Diversification Opportunities for KOT Addu and Pakistan Oilfields

-0.11

Correlation Coefficient

KOT Addu  Pakistan Oilfields

Good diversification

The 3 months correlation between KOT and Pakistan is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding KOT Addu Power and Pakistan Oilfields in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Oilfields and KOT Addu 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 KOT Addu Power are associated (or correlated) with Pakistan Oilfields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Oilfields has no effect on the direction of KOT Addu i.e., KOT Addu and Pakistan Oilfields go up and down completely randomly.

Pair Corralation between KOT Addu and Pakistan Oilfields

Assuming the 90 days trading horizon KOT Addu Power is expected to generate 0.95 times more return on investment than Pakistan Oilfields. However, KOT Addu Power is 1.05 times less risky than Pakistan Oilfields. It trades about 0.01 of its potential returns per unit of risk. Pakistan Oilfields is currently generating about -0.17 per unit of risk. If you would invest  3,287  in KOT Addu Power on December 23, 2024 and sell it today you would earn a total of  13.00  from holding KOT Addu Power or generate 0.4% return on investment over 90 days.

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

KOT Addu Power  vs.  Pakistan Oilfields

KOT Addu Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days KOT Addu Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, KOT Addu is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pakistan Oilfields

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pakistan Oilfields has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with KOT Addu and Pakistan Oilfields

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

The idea behind KOT Addu Power and Pakistan Oilfields 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.