Correlation Between Pakistan Tobacco and Pakistan Cables

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

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

Diversification Opportunities for Pakistan Tobacco and Pakistan Cables

0.39

Correlation Coefficient

Pakistan Tobacco  Pakistan Cables

Weak diversification

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

Pair Corralation between Pakistan Tobacco and Pakistan Cables

Assuming the 90 days trading horizon Pakistan Tobacco is expected to generate 0.84 times more return on investment than Pakistan Cables. However, Pakistan Tobacco is 1.19 times less risky than Pakistan Cables. It trades about 0.13 of its potential returns per unit of risk. Pakistan Cables is currently generating about 0.07 per unit of risk. If you would invest  78,835  in Pakistan Tobacco on October 9, 2024 and sell it today you would earn a total of  48,842  from holding Pakistan Tobacco or generate 61.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.77%
Values	Daily Returns

Pakistan Tobacco  vs.  Pakistan Cables

Pakistan Tobacco

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Tobacco are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Pakistan Tobacco sustained solid returns over the last few months and may actually be approaching a breakup point.

Pakistan Cables

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Cables are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pakistan Cables sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pakistan Tobacco and Pakistan Cables

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

The idea behind Pakistan Tobacco and Pakistan Cables 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 CEOs Directory module to screen CEOs from public companies around the world.