Correlation Between Pakistan Aluminium and JS Global

Can any of the company-specific risk be diversified away by investing in both Pakistan Aluminium and JS Global 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 JS Global 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 JS Global Banking, you can compare the effects of market volatilities on Pakistan Aluminium and JS Global 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 JS Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Aluminium and JS Global.

Diversification Opportunities for Pakistan Aluminium and JS Global

0.31

Correlation Coefficient

Pakistan Aluminium  JS Global

Weak diversification

The 3 months correlation between Pakistan and JSGBETF is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Aluminium Beverage and JS Global Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JS Global Banking 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 JS Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JS Global Banking has no effect on the direction of Pakistan Aluminium i.e., Pakistan Aluminium and JS Global go up and down completely randomly.

Pair Corralation between Pakistan Aluminium and JS Global

Assuming the 90 days trading horizon Pakistan Aluminium Beverage is expected to generate 0.79 times more return on investment than JS Global. However, Pakistan Aluminium Beverage is 1.27 times less risky than JS Global. It trades about 0.0 of its potential returns per unit of risk. JS Global Banking is currently generating about -0.01 per unit of risk. If you would invest  12,567  in Pakistan Aluminium Beverage on December 26, 2024 and sell it today you would lose (253.00) from holding Pakistan Aluminium Beverage or give up 2.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Pakistan Aluminium Beverage  vs.  JS Global Banking

Pakistan Aluminium

Risk-Adjusted Performance

Weak

Over the last 90 days Pakistan Aluminium Beverage has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

JS Global Banking

Risk-Adjusted Performance

Very Weak

Over the last 90 days JS Global Banking has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, JS Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pakistan Aluminium and JS Global

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

The idea behind Pakistan Aluminium Beverage and JS Global Banking 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.