Correlation Between Pakistan Tobacco and Data Agro

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

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

Diversification Opportunities for Pakistan Tobacco and Data Agro

0.81

Correlation Coefficient

Pakistan Tobacco  Data Agro

Very poor diversification

The 3 months correlation between Pakistan and Data is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Tobacco and Data Agro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data Agro and Pakistan Tobacco 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 Tobacco are associated (or correlated) with Data Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data Agro has no effect on the direction of Pakistan Tobacco i.e., Pakistan Tobacco and Data Agro go up and down completely randomly.

Pair Corralation between Pakistan Tobacco and Data Agro

Assuming the 90 days trading horizon Pakistan Tobacco is expected to generate 0.35 times more return on investment than Data Agro. However, Pakistan Tobacco is 2.89 times less risky than Data Agro. It trades about -0.15 of its potential returns per unit of risk. Data Agro is currently generating about -0.13 per unit of risk. If you would invest  135,254  in Pakistan Tobacco on December 23, 2024 and sell it today you would lose (15,254) from holding Pakistan Tobacco or give up 11.28% of portfolio value over 90 days.

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

Pakistan Tobacco  vs.  Data Agro

Pakistan Tobacco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pakistan Tobacco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Data Agro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Data Agro 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.

Pair Trading with Pakistan Tobacco and Data Agro

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

The idea behind Pakistan Tobacco and Data Agro 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.