Correlation Between Pakistan Reinsurance and Habib Sugar

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

By analyzing existing cross correlation between Pakistan Reinsurance and Habib Sugar Mills, you can compare the effects of market volatilities on Pakistan Reinsurance and Habib Sugar 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 Habib Sugar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Reinsurance and Habib Sugar.

Diversification Opportunities for Pakistan Reinsurance and Habib Sugar

0.31

Correlation Coefficient

Pakistan Reinsurance  Habib Sugar

Weak diversification

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

Pair Corralation between Pakistan Reinsurance and Habib Sugar

Assuming the 90 days trading horizon Pakistan Reinsurance is expected to generate 0.78 times more return on investment than Habib Sugar. However, Pakistan Reinsurance is 1.28 times less risky than Habib Sugar. It trades about 0.04 of its potential returns per unit of risk. Habib Sugar Mills is currently generating about -0.09 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  41.00  from holding Pakistan Reinsurance or generate 2.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Pakistan Reinsurance  vs.  Habib Sugar Mills

Pakistan Reinsurance

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Reinsurance are ranked lower than 3 (%) 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.

Habib Sugar Mills

Risk-Adjusted Performance

Very Weak

Over the last 90 days Habib Sugar Mills has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers 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 Reinsurance and Habib Sugar

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

The idea behind Pakistan Reinsurance and Habib Sugar Mills 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.