Correlation Between Pakistan Refinery and Air Link

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

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

Diversification Opportunities for Pakistan Refinery and Air Link

0.76

Correlation Coefficient

Pakistan Refinery  Air Link

Poor diversification

The 3 months correlation between Pakistan and Air is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Refinery and Air Link Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Link Communication and Pakistan Refinery 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 Refinery are associated (or correlated) with Air Link. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Link Communication has no effect on the direction of Pakistan Refinery i.e., Pakistan Refinery and Air Link go up and down completely randomly.

Pair Corralation between Pakistan Refinery and Air Link

Assuming the 90 days trading horizon Pakistan Refinery is expected to generate 1.61 times more return on investment than Air Link. However, Pakistan Refinery is 1.61 times more volatile than Air Link Communication. It trades about -0.03 of its potential returns per unit of risk. Air Link Communication is currently generating about -0.15 per unit of risk. If you would invest  4,046  in Pakistan Refinery on December 29, 2024 and sell it today you would lose (363.00) from holding Pakistan Refinery or give up 8.97% of portfolio value over 90 days.

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

Pakistan Refinery  vs.  Air Link Communication

Pakistan Refinery

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pakistan Refinery has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Pakistan Refinery is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Air Link Communication

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Link Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Pakistan Refinery and Air Link

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

The idea behind Pakistan Refinery and Air Link Communication 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.