Correlation Between Nimir Industrial and Pakistan Petroleum

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

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

Diversification Opportunities for Nimir Industrial and Pakistan Petroleum

0.76

Correlation Coefficient

Nimir Industrial  Pakistan Petroleum

Poor diversification

The 3 months correlation between Nimir and Pakistan is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Nimir Industrial Chemical and Pakistan Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Petroleum and Nimir Industrial 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 Nimir Industrial Chemical are associated (or correlated) with Pakistan Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Petroleum has no effect on the direction of Nimir Industrial i.e., Nimir Industrial and Pakistan Petroleum go up and down completely randomly.

Pair Corralation between Nimir Industrial and Pakistan Petroleum

Assuming the 90 days trading horizon Nimir Industrial Chemical is expected to generate 1.16 times more return on investment than Pakistan Petroleum. However, Nimir Industrial is 1.16 times more volatile than Pakistan Petroleum. It trades about 0.09 of its potential returns per unit of risk. Pakistan Petroleum is currently generating about 0.1 per unit of risk. If you would invest  5,259  in Nimir Industrial Chemical on October 7, 2024 and sell it today you would earn a total of  9,141  from holding Nimir Industrial Chemical or generate 173.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	88.43%
Values	Daily Returns

Nimir Industrial Chemical  vs.  Pakistan Petroleum

Nimir Industrial Chemical

Risk-Adjusted Performance

12 of 100

Good

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

Pakistan Petroleum

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Petroleum are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Pakistan Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nimir Industrial and Pakistan Petroleum

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

The idea behind Nimir Industrial Chemical and Pakistan Petroleum 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.