Correlation Between Mari Petroleum and Pakistan Aluminium

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

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

Diversification Opportunities for Mari Petroleum and Pakistan Aluminium

0.98

Correlation Coefficient

Mari Petroleum  Pakistan Aluminium

Almost no diversification

The 3 months correlation between Mari and Pakistan is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Mari Petroleum and Pakistan Aluminium Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Aluminium and Mari Petroleum 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 Mari Petroleum are associated (or correlated) with Pakistan Aluminium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Aluminium has no effect on the direction of Mari Petroleum i.e., Mari Petroleum and Pakistan Aluminium go up and down completely randomly.

Pair Corralation between Mari Petroleum and Pakistan Aluminium

Assuming the 90 days trading horizon Mari Petroleum is expected to under-perform the Pakistan Aluminium. In addition to that, Mari Petroleum is 1.2 times more volatile than Pakistan Aluminium Beverage. It trades about -0.32 of its total potential returns per unit of risk. Pakistan Aluminium Beverage is currently generating about -0.12 per unit of volatility. If you would invest  13,684  in Pakistan Aluminium Beverage on October 15, 2024 and sell it today you would lose (1,326) from holding Pakistan Aluminium Beverage or give up 9.69% of portfolio value over 90 days.

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

Mari Petroleum  vs.  Pakistan Aluminium Beverage

Mari Petroleum

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mari Petroleum are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Mari Petroleum sustained solid returns over the last few months and may actually be approaching a breakup point.

Pakistan Aluminium

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Aluminium Beverage are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pakistan Aluminium sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mari Petroleum and Pakistan Aluminium

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

The idea behind Mari Petroleum and Pakistan Aluminium Beverage 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.