Correlation Between Pak Gulf and Pak Datacom

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

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

Diversification Opportunities for Pak Gulf and Pak Datacom

0.45

Correlation Coefficient

Pak Gulf  Pak Datacom

Very weak diversification

The 3 months correlation between Pak and Pak is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Pak Gulf Leasing and Pak Datacom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pak Datacom and Pak Gulf 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 Pak Gulf Leasing are associated (or correlated) with Pak Datacom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pak Datacom has no effect on the direction of Pak Gulf i.e., Pak Gulf and Pak Datacom go up and down completely randomly.

Pair Corralation between Pak Gulf and Pak Datacom

Assuming the 90 days trading horizon Pak Gulf Leasing is expected to generate 1.76 times more return on investment than Pak Datacom. However, Pak Gulf is 1.76 times more volatile than Pak Datacom. It trades about 0.17 of its potential returns per unit of risk. Pak Datacom is currently generating about 0.02 per unit of risk. If you would invest  762.00  in Pak Gulf Leasing on September 15, 2024 and sell it today you would earn a total of  426.00  from holding Pak Gulf Leasing or generate 55.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Pak Gulf Leasing  vs.  Pak Datacom

Pak Gulf Leasing

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pak Gulf Leasing are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pak Gulf sustained solid returns over the last few months and may actually be approaching a breakup point.

Pak Datacom

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pak Datacom are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Pak Datacom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pak Gulf and Pak Datacom

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

The idea behind Pak Gulf Leasing and Pak Datacom 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.