Correlation Between Pakistan Oilfields and IGI Life

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

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

Diversification Opportunities for Pakistan Oilfields and IGI Life

-0.31

Correlation Coefficient

Pakistan Oilfields  IGI Life

Very good diversification

The 3 months correlation between Pakistan and IGI is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Oilfields and IGI Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGI Life Insurance and Pakistan Oilfields 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 Oilfields are associated (or correlated) with IGI Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGI Life Insurance has no effect on the direction of Pakistan Oilfields i.e., Pakistan Oilfields and IGI Life go up and down completely randomly.

Pair Corralation between Pakistan Oilfields and IGI Life

Assuming the 90 days trading horizon Pakistan Oilfields is expected to under-perform the IGI Life. But the stock apears to be less risky and, when comparing its historical volatility, Pakistan Oilfields is 4.99 times less risky than IGI Life. The stock trades about -0.18 of its potential returns per unit of risk. The IGI Life Insurance is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,473  in IGI Life Insurance on December 22, 2024 and sell it today you would earn a total of  220.00  from holding IGI Life Insurance or generate 14.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.87%
Values	Daily Returns

Pakistan Oilfields  vs.  IGI Life Insurance

Pakistan Oilfields

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pakistan Oilfields has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

IGI Life Insurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in IGI Life Insurance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IGI Life sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pakistan Oilfields and IGI Life

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

The idea behind Pakistan Oilfields and IGI Life 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.