Correlation Between Pak Gulf and Pakistan Synthetics

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Can any of the company-specific risk be diversified away by investing in both Pak Gulf and Pakistan Synthetics 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 Pakistan Synthetics 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 Pakistan Synthetics, you can compare the effects of market volatilities on Pak Gulf and Pakistan Synthetics 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 Pakistan Synthetics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pak Gulf and Pakistan Synthetics.

Diversification Opportunities for Pak Gulf and Pakistan Synthetics

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Pak and Pakistan is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Pak Gulf Leasing and Pakistan Synthetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Synthetics 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 Pakistan Synthetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Synthetics has no effect on the direction of Pak Gulf i.e., Pak Gulf and Pakistan Synthetics go up and down completely randomly.

Pair Corralation between Pak Gulf and Pakistan Synthetics

Assuming the 90 days trading horizon Pak Gulf Leasing is expected to generate 1.26 times more return on investment than Pakistan Synthetics. However, Pak Gulf is 1.26 times more volatile than Pakistan Synthetics. It trades about 0.16 of its potential returns per unit of risk. Pakistan Synthetics is currently generating about 0.2 per unit of risk. If you would invest  733.00  in Pak Gulf Leasing on September 18, 2024 and sell it today you would earn a total of  398.00  from holding Pak Gulf Leasing or generate 54.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Pak Gulf Leasing  vs.  Pakistan Synthetics

 Performance 
       Timeline  
Pak Gulf Leasing 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Pak Gulf Leasing are ranked lower than 12 (%) 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.
Pakistan Synthetics 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Synthetics are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pakistan Synthetics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pak Gulf and Pakistan Synthetics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pak Gulf and Pakistan Synthetics

The main advantage of trading using opposite Pak Gulf and Pakistan Synthetics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pak Gulf position performs unexpectedly, Pakistan Synthetics 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 Synthetics will offset losses from the drop in Pakistan Synthetics' long position.
The idea behind Pak Gulf Leasing and Pakistan Synthetics 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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