Correlation Between Pakistan State and Tariq CorpPref

Can any of the company-specific risk be diversified away by investing in both Pakistan State and Tariq CorpPref 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 Tariq CorpPref 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 Tariq CorpPref, you can compare the effects of market volatilities on Pakistan State and Tariq CorpPref 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 Tariq CorpPref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan State and Tariq CorpPref.

Diversification Opportunities for Pakistan State and Tariq CorpPref

-0.65

Correlation Coefficient

Pakistan State  Tariq CorpPref

Excellent diversification

The 3 months correlation between Pakistan and Tariq is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan State Oil and Tariq CorpPref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tariq CorpPref 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 Tariq CorpPref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tariq CorpPref has no effect on the direction of Pakistan State i.e., Pakistan State and Tariq CorpPref go up and down completely randomly.

Pair Corralation between Pakistan State and Tariq CorpPref

Assuming the 90 days trading horizon Pakistan State Oil is expected to generate 0.41 times more return on investment than Tariq CorpPref. However, Pakistan State Oil is 2.43 times less risky than Tariq CorpPref. It trades about 0.19 of its potential returns per unit of risk. Tariq CorpPref is currently generating about -0.02 per unit of risk. If you would invest  10,234  in Pakistan State Oil on September 28, 2024 and sell it today you would earn a total of  31,674  from holding Pakistan State Oil or generate 309.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	38.58%
Values	Daily Returns

Pakistan State Oil  vs.  Tariq CorpPref

Pakistan State Oil

Risk-Adjusted Performance

37 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan State Oil are ranked lower than 37 (%) 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.

Tariq CorpPref

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tariq CorpPref has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Pakistan State and Tariq CorpPref

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

The idea behind Pakistan State Oil and Tariq CorpPref 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.