Correlation Between Pakistan Aluminium and Shifa International

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

Diversification Opportunities for Pakistan Aluminium and Shifa International

PakistanShifaDiversified AwayPakistanShifaDiversified Away100%
0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Pakistan and Shifa is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Aluminium Beverage and Shifa International Hospitals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shifa International 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 Shifa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shifa International has no effect on the direction of Pakistan Aluminium i.e., Pakistan Aluminium and Shifa International go up and down completely randomly.

Pair Corralation between Pakistan Aluminium and Shifa International

Assuming the 90 days trading horizon Pakistan Aluminium is expected to generate 1.81 times less return on investment than Shifa International. But when comparing it to its historical volatility, Pakistan Aluminium Beverage is 1.17 times less risky than Shifa International. It trades about 0.14 of its potential returns per unit of risk. Shifa International Hospitals is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  24,706  in Shifa International Hospitals on October 26, 2024 and sell it today you would earn a total of  16,489  from holding Shifa International Hospitals or generate 66.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Pakistan Aluminium Beverage  vs.  Shifa International Hospitals

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 020406080
JavaScript chart by amCharts 3.21.15PABC SHFA
       Timeline  
Pakistan Aluminium 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Aluminium Beverage are ranked lower than 11 (%) 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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan8090100110120130140
Shifa International 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Shifa International Hospitals are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shifa International sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan300350400450

Pakistan Aluminium and Shifa International Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-10.85-8.12-5.4-2.680.02.845.788.7211.6614.6 0.0150.0200.0250.030
JavaScript chart by amCharts 3.21.15PABC SHFA
       Returns  

Pair Trading with Pakistan Aluminium and Shifa International

The main advantage of trading using opposite Pakistan Aluminium and Shifa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Aluminium position performs unexpectedly, Shifa International 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 Shifa International will offset losses from the drop in Shifa International's long position.
The idea behind Pakistan Aluminium Beverage and Shifa International Hospitals 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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