Correlation Between Pakistan State and Pakistan National

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

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

Diversification Opportunities for Pakistan State and Pakistan National

0.94

Correlation Coefficient

Pakistan State  Pakistan National

Almost no diversification

The 3 months correlation between Pakistan and Pakistan is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan State Oil and Pakistan National Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan National and Pakistan State 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 State Oil are associated (or correlated) with Pakistan National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan National has no effect on the direction of Pakistan State i.e., Pakistan State and Pakistan National go up and down completely randomly.

Pair Corralation between Pakistan State and Pakistan National

Assuming the 90 days trading horizon Pakistan State Oil is expected to generate 0.82 times more return on investment than Pakistan National. However, Pakistan State Oil is 1.23 times less risky than Pakistan National. It trades about 0.43 of its potential returns per unit of risk. Pakistan National Shipping is currently generating about 0.34 per unit of risk. If you would invest  23,397  in Pakistan State Oil on September 26, 2024 and sell it today you would earn a total of  19,856  from holding Pakistan State Oil or generate 84.87% return on investment over 90 days.

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

Pakistan State Oil  vs.  Pakistan National Shipping

Pakistan State Oil

Risk-Adjusted Performance

38 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan State Oil are ranked lower than 38 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Pakistan State reported solid returns over the last few months and may actually be approaching a breakup point.

Pakistan National

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan National Shipping are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pakistan National sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pakistan State and Pakistan National

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

The idea behind Pakistan State Oil and Pakistan National Shipping 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.