Correlation Between Pakistan Oilfields and Organic Meat

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

By analyzing existing cross correlation between Pakistan Oilfields and The Organic Meat, you can compare the effects of market volatilities on Pakistan Oilfields and Organic Meat 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 Organic Meat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Oilfields and Organic Meat.

Diversification Opportunities for Pakistan Oilfields and Organic Meat

0.21

Correlation Coefficient

Pakistan Oilfields  Organic Meat

Modest diversification

The 3 months correlation between Pakistan and Organic is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Oilfields and The Organic Meat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Organic Meat 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 Organic Meat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Organic Meat has no effect on the direction of Pakistan Oilfields i.e., Pakistan Oilfields and Organic Meat go up and down completely randomly.

Pair Corralation between Pakistan Oilfields and Organic Meat

Assuming the 90 days trading horizon Pakistan Oilfields is expected to generate 0.73 times more return on investment than Organic Meat. However, Pakistan Oilfields is 1.37 times less risky than Organic Meat. It trades about 0.03 of its potential returns per unit of risk. The Organic Meat is currently generating about 0.01 per unit of risk. If you would invest  60,349  in Pakistan Oilfields on October 12, 2024 and sell it today you would earn a total of  1,677  from holding Pakistan Oilfields or generate 2.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Pakistan Oilfields  vs.  The Organic Meat

Pakistan Oilfields

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Oilfields are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Pakistan Oilfields is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Organic Meat

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Organic Meat are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent primary indicators, Organic Meat is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Pakistan Oilfields and Organic Meat

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

The idea behind Pakistan Oilfields and The Organic Meat 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.