Correlation Between Pak Datacom and Pak Gulf

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

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

Diversification Opportunities for Pak Datacom and Pak Gulf

0.39

Correlation Coefficient

Pak Datacom  Pak Gulf

Weak diversification

The 3 months correlation between Pak and Pak is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Pak Datacom and Pak Gulf Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pak Gulf Leasing and Pak Datacom 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 Pak Datacom are associated (or correlated) with Pak Gulf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pak Gulf Leasing has no effect on the direction of Pak Datacom i.e., Pak Datacom and Pak Gulf go up and down completely randomly.

Pair Corralation between Pak Datacom and Pak Gulf

Assuming the 90 days trading horizon Pak Datacom is expected to under-perform the Pak Gulf. But the stock apears to be less risky and, when comparing its historical volatility, Pak Datacom is 1.56 times less risky than Pak Gulf. The stock trades about -0.16 of its potential returns per unit of risk. The Pak Gulf Leasing is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,581  in Pak Gulf Leasing on December 26, 2024 and sell it today you would lose (51.00) from holding Pak Gulf Leasing or give up 3.23% of portfolio value over 90 days.

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

Pak Datacom  vs.  Pak Gulf Leasing

Pak Datacom

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pak Datacom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pak Gulf Leasing

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pak Gulf Leasing are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pak Gulf may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pak Datacom and Pak Gulf

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

The idea behind Pak Datacom and Pak Gulf Leasing 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.