Correlation Between Loads and Pak Gulf

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

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

Diversification Opportunities for Loads and Pak Gulf

0.58

Correlation Coefficient

Loads  Pak Gulf

Very weak diversification

The 3 months correlation between Loads and Pak is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Loads and Pak Gulf Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pak Gulf Leasing and Loads 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 Loads are associated (or correlated) with Pak Gulf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pak Gulf Leasing has no effect on the direction of Loads i.e., Loads and Pak Gulf go up and down completely randomly.

Pair Corralation between Loads and Pak Gulf

Assuming the 90 days trading horizon Loads is expected to generate 7.6 times less return on investment than Pak Gulf. But when comparing it to its historical volatility, Loads is 2.81 times less risky than Pak Gulf. It trades about 0.16 of its potential returns per unit of risk. Pak Gulf Leasing is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  1,136  in Pak Gulf Leasing on October 20, 2024 and sell it today you would earn a total of  1,090  from holding Pak Gulf Leasing or generate 95.95% return on investment over 90 days.

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

Loads  vs.  Pak Gulf Leasing

Loads

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Loads are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Loads disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pak Gulf Leasing

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pak Gulf Leasing are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pak Gulf sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Loads and Pak Gulf

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

The idea behind Loads and Pak Gulf Leasing 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.