Correlation Between Pakistan Hotel and Wah Nobel

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Can any of the company-specific risk be diversified away by investing in both Pakistan Hotel and Wah Nobel 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 Hotel and Wah Nobel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Hotel Developers and Wah Nobel Chemicals, you can compare the effects of market volatilities on Pakistan Hotel and Wah Nobel 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 Hotel with a short position of Wah Nobel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Hotel and Wah Nobel.

Diversification Opportunities for Pakistan Hotel and Wah Nobel

PakistanWahDiversified AwayPakistanWahDiversified Away100%
-0.03
  Correlation Coefficient

Good diversification

The 3 months correlation between Pakistan and Wah is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Hotel Developers and Wah Nobel Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Nobel Chemicals and Pakistan Hotel 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 Hotel Developers are associated (or correlated) with Wah Nobel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Nobel Chemicals has no effect on the direction of Pakistan Hotel i.e., Pakistan Hotel and Wah Nobel go up and down completely randomly.

Pair Corralation between Pakistan Hotel and Wah Nobel

Assuming the 90 days trading horizon Pakistan Hotel is expected to generate 1.1 times less return on investment than Wah Nobel. In addition to that, Pakistan Hotel is 2.4 times more volatile than Wah Nobel Chemicals. It trades about 0.07 of its total potential returns per unit of risk. Wah Nobel Chemicals is currently generating about 0.18 per unit of volatility. If you would invest  19,430  in Wah Nobel Chemicals on September 15, 2024 and sell it today you would earn a total of  4,470  from holding Wah Nobel Chemicals or generate 23.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Pakistan Hotel Developers  vs.  Wah Nobel Chemicals

 Performance 
JavaScript chart by amCharts 3.21.15OctNov -30-20-100
JavaScript chart by amCharts 3.21.15PHDL WAHN
       Timeline  
Pakistan Hotel Developers 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Hotel Developers are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pakistan Hotel sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec35404550556065
Wah Nobel Chemicals 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Wah Nobel Chemicals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wah Nobel sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec190200210220230240250260

Pakistan Hotel and Wah Nobel Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-14.34-10.74-7.14-3.540.03.587.2911.014.7118.42 0.010.020.030.040.050.060.07
JavaScript chart by amCharts 3.21.15PHDL WAHN
       Returns  

Pair Trading with Pakistan Hotel and Wah Nobel

The main advantage of trading using opposite Pakistan Hotel and Wah Nobel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Hotel position performs unexpectedly, Wah Nobel 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 Wah Nobel will offset losses from the drop in Wah Nobel's long position.
The idea behind Pakistan Hotel Developers and Wah Nobel Chemicals 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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