Correlation Between Pakistan Aluminium and Jubilee Life

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

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

Diversification Opportunities for Pakistan Aluminium and Jubilee Life

0.02

Correlation Coefficient

Pakistan Aluminium  Jubilee Life

Significant diversification

The 3 months correlation between Pakistan and Jubilee is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Aluminium Beverage and Jubilee Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jubilee Life Insurance and Pakistan Aluminium 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 Pakistan Aluminium Beverage are associated (or correlated) with Jubilee Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jubilee Life Insurance has no effect on the direction of Pakistan Aluminium i.e., Pakistan Aluminium and Jubilee Life go up and down completely randomly.

Pair Corralation between Pakistan Aluminium and Jubilee Life

Assuming the 90 days trading horizon Pakistan Aluminium Beverage is expected to generate 0.89 times more return on investment than Jubilee Life. However, Pakistan Aluminium Beverage is 1.13 times less risky than Jubilee Life. It trades about 0.02 of its potential returns per unit of risk. Jubilee Life Insurance is currently generating about -0.05 per unit of risk. If you would invest  12,567  in Pakistan Aluminium Beverage on December 25, 2024 and sell it today you would earn a total of  200.00  from holding Pakistan Aluminium Beverage or generate 1.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.55%
Values	Daily Returns

Pakistan Aluminium Beverage  vs.  Jubilee Life Insurance

Pakistan Aluminium

Risk-Adjusted Performance

Insignificant

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

Jubilee Life Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jubilee Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Pakistan Aluminium and Jubilee Life

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

The idea behind Pakistan Aluminium Beverage and Jubilee Life Insurance 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.