Correlation Between Murree Brewery and Pakistan Tobacco

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

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

Diversification Opportunities for Murree Brewery and Pakistan Tobacco

-0.47

Correlation Coefficient

Murree Brewery  Pakistan Tobacco

Very good diversification

The 3 months correlation between Murree and Pakistan is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Murree Brewery and Pakistan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Tobacco and Murree Brewery 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 Murree Brewery are associated (or correlated) with Pakistan Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Tobacco has no effect on the direction of Murree Brewery i.e., Murree Brewery and Pakistan Tobacco go up and down completely randomly.

Pair Corralation between Murree Brewery and Pakistan Tobacco

Assuming the 90 days trading horizon Murree Brewery is expected to generate 1.11 times more return on investment than Pakistan Tobacco. However, Murree Brewery is 1.11 times more volatile than Pakistan Tobacco. It trades about 0.14 of its potential returns per unit of risk. Pakistan Tobacco is currently generating about 0.02 per unit of risk. If you would invest  67,436  in Murree Brewery on December 2, 2024 and sell it today you would earn a total of  9,764  from holding Murree Brewery or generate 14.48% return on investment over 90 days.

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

Murree Brewery  vs.  Pakistan Tobacco

Murree Brewery

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Murree Brewery are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Murree Brewery disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pakistan Tobacco

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Tobacco are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Pakistan Tobacco is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Murree Brewery and Pakistan Tobacco

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

The idea behind Murree Brewery and Pakistan Tobacco 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.