Correlation Between Pakistan Reinsurance and AKD Hospitality

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

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

Diversification Opportunities for Pakistan Reinsurance and AKD Hospitality

-0.57

Correlation Coefficient

Pakistan Reinsurance  AKD Hospitality

Excellent diversification

The 3 months correlation between Pakistan and AKD is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Reinsurance and AKD Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKD Hospitality and Pakistan Reinsurance 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 Reinsurance are associated (or correlated) with AKD Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKD Hospitality has no effect on the direction of Pakistan Reinsurance i.e., Pakistan Reinsurance and AKD Hospitality go up and down completely randomly.

Pair Corralation between Pakistan Reinsurance and AKD Hospitality

Assuming the 90 days trading horizon Pakistan Reinsurance is expected to generate 0.56 times more return on investment than AKD Hospitality. However, Pakistan Reinsurance is 1.78 times less risky than AKD Hospitality. It trades about 0.06 of its potential returns per unit of risk. AKD Hospitality is currently generating about 0.01 per unit of risk. If you would invest  1,500  in Pakistan Reinsurance on December 24, 2024 and sell it today you would earn a total of  62.00  from holding Pakistan Reinsurance or generate 4.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	85.48%
Values	Daily Returns

Pakistan Reinsurance  vs.  AKD Hospitality

Pakistan Reinsurance

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Reinsurance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Pakistan Reinsurance is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

AKD Hospitality

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AKD Hospitality are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, AKD Hospitality is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Pakistan Reinsurance and AKD Hospitality

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

The idea behind Pakistan Reinsurance and AKD Hospitality 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.