Correlation Between Lucky Cement and Pakistan Oilfields

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

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

Diversification Opportunities for Lucky Cement and Pakistan Oilfields

0.64

Correlation Coefficient

Lucky Cement  Pakistan Oilfields

Poor diversification

The 3 months correlation between Lucky and Pakistan is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lucky Cement and Pakistan Oilfields in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Oilfields and Lucky Cement 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 Lucky Cement 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 Lucky Cement i.e., Lucky Cement and Pakistan Oilfields go up and down completely randomly.

Pair Corralation between Lucky Cement and Pakistan Oilfields

Assuming the 90 days trading horizon Lucky Cement is expected to under-perform the Pakistan Oilfields. In addition to that, Lucky Cement is 1.55 times more volatile than Pakistan Oilfields. It trades about -0.01 of its total potential returns per unit of risk. Pakistan Oilfields is currently generating about 0.11 per unit of volatility. If you would invest  60,958  in Pakistan Oilfields on October 8, 2024 and sell it today you would earn a total of  2,602  from holding Pakistan Oilfields or generate 4.27% return on investment over 90 days.

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

Lucky Cement  vs.  Pakistan Oilfields

Lucky Cement

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lucky Cement are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Lucky Cement sustained solid returns over the last few months and may actually be approaching a breakup point.

Pakistan Oilfields

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Oilfields are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Pakistan Oilfields is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Lucky Cement and Pakistan Oilfields

The main advantage of trading using opposite Lucky Cement and Pakistan Oilfields positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucky Cement 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 Lucky Cement 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.