Correlation Between Loads and Pakistan Oilfields

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

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

Diversification Opportunities for Loads and Pakistan Oilfields

-0.37

Correlation Coefficient

Loads  Pakistan Oilfields

Very good diversification

The 3 months correlation between Loads and Pakistan is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Loads and Pakistan Oilfields in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Oilfields 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 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 Loads i.e., Loads and Pakistan Oilfields go up and down completely randomly.

Pair Corralation between Loads and Pakistan Oilfields

Assuming the 90 days trading horizon Loads is expected to generate 3.5 times more return on investment than Pakistan Oilfields. However, Loads is 3.5 times more volatile than Pakistan Oilfields. It trades about 0.1 of its potential returns per unit of risk. Pakistan Oilfields is currently generating about -0.15 per unit of risk. If you would invest  1,514  in Loads on December 24, 2024 and sell it today you would earn a total of  278.00  from holding Loads or generate 18.36% return on investment over 90 days.

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

Loads  vs.  Pakistan Oilfields

Loads

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Loads are ranked lower than 7 (%) 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.

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 weak 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 Loads and Pakistan Oilfields

The main advantage of trading using opposite Loads and Pakistan Oilfields positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loads 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 Loads 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.