Correlation Between Pakistan Synthetics and WorldCall Telecom

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

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

Diversification Opportunities for Pakistan Synthetics and WorldCall Telecom

0.14

Correlation Coefficient

Pakistan Synthetics  WorldCall Telecom

Average diversification

The 3 months correlation between Pakistan and WorldCall is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Synthetics and WorldCall Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WorldCall Telecom and Pakistan Synthetics 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 Synthetics are associated (or correlated) with WorldCall Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WorldCall Telecom has no effect on the direction of Pakistan Synthetics i.e., Pakistan Synthetics and WorldCall Telecom go up and down completely randomly.

Pair Corralation between Pakistan Synthetics and WorldCall Telecom

Assuming the 90 days trading horizon Pakistan Synthetics is expected to generate 1.09 times more return on investment than WorldCall Telecom. However, Pakistan Synthetics is 1.09 times more volatile than WorldCall Telecom. It trades about 0.16 of its potential returns per unit of risk. WorldCall Telecom is currently generating about 0.0 per unit of risk. If you would invest  2,950  in Pakistan Synthetics on December 3, 2024 and sell it today you would earn a total of  1,451  from holding Pakistan Synthetics or generate 49.19% return on investment over 90 days.

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

Pakistan Synthetics  vs.  WorldCall Telecom

Pakistan Synthetics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Synthetics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pakistan Synthetics sustained solid returns over the last few months and may actually be approaching a breakup point.

WorldCall Telecom

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Pakistan Synthetics and WorldCall Telecom

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

The idea behind Pakistan Synthetics and WorldCall Telecom 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.