Correlation Between Pakistan Telecommunicatio and Aisha Steel

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

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

Diversification Opportunities for Pakistan Telecommunicatio and Aisha Steel

0.93

Correlation Coefficient

Pakistan Telecommunicatio  Aisha Steel

Almost no diversification

The 3 months correlation between Pakistan and Aisha is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Telecommunication and Aisha Steel Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aisha Steel Mills and Pakistan Telecommunicatio 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 Telecommunication are associated (or correlated) with Aisha Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aisha Steel Mills has no effect on the direction of Pakistan Telecommunicatio i.e., Pakistan Telecommunicatio and Aisha Steel go up and down completely randomly.

Pair Corralation between Pakistan Telecommunicatio and Aisha Steel

Assuming the 90 days trading horizon Pakistan Telecommunicatio is expected to generate 1.12 times less return on investment than Aisha Steel. In addition to that, Pakistan Telecommunicatio is 1.12 times more volatile than Aisha Steel Mills. It trades about 0.17 of its total potential returns per unit of risk. Aisha Steel Mills is currently generating about 0.22 per unit of volatility. If you would invest  683.00  in Aisha Steel Mills on October 25, 2024 and sell it today you would earn a total of  420.00  from holding Aisha Steel Mills or generate 61.49% return on investment over 90 days.

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

Pakistan Telecommunication  vs.  Aisha Steel Mills

Pakistan Telecommunicatio

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Telecommunication are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Pakistan Telecommunicatio reported solid returns over the last few months and may actually be approaching a breakup point.

Aisha Steel Mills

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aisha Steel Mills are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Aisha Steel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pakistan Telecommunicatio and Aisha Steel

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

The idea behind Pakistan Telecommunication and Aisha Steel Mills 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.