Correlation Between Pakistan Cables and TPL Insurance

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

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

Diversification Opportunities for Pakistan Cables and TPL Insurance

0.54

Correlation Coefficient

Pakistan Cables  TPL Insurance

Very weak diversification

The 3 months correlation between Pakistan and TPL is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Cables and TPL Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPL Insurance and Pakistan Cables 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 Cables are associated (or correlated) with TPL Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPL Insurance has no effect on the direction of Pakistan Cables i.e., Pakistan Cables and TPL Insurance go up and down completely randomly.

Pair Corralation between Pakistan Cables and TPL Insurance

Assuming the 90 days trading horizon Pakistan Cables is expected to generate 0.88 times more return on investment than TPL Insurance. However, Pakistan Cables is 1.14 times less risky than TPL Insurance. It trades about 0.08 of its potential returns per unit of risk. TPL Insurance is currently generating about -0.01 per unit of risk. If you would invest  10,908  in Pakistan Cables on October 3, 2024 and sell it today you would earn a total of  7,231  from holding Pakistan Cables or generate 66.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.68%
Values	Daily Returns

Pakistan Cables  vs.  TPL Insurance

Pakistan Cables

Risk-Adjusted Performance

14 of 100

OK

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.

TPL Insurance

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TPL Insurance are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TPL Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pakistan Cables and TPL Insurance

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

The idea behind Pakistan Cables and TPL Insurance 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.