Correlation Between Pakistan Telecommunicatio and Bank of Punjab

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

By analyzing existing cross correlation between Pakistan Telecommunication and Bank of Punjab, you can compare the effects of market volatilities on Pakistan Telecommunicatio and Bank of Punjab 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 Bank of Punjab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Telecommunicatio and Bank of Punjab.

Diversification Opportunities for Pakistan Telecommunicatio and Bank of Punjab

-0.33

Correlation Coefficient

Pakistan Telecommunicatio  Bank of Punjab

Very good diversification

The 3 months correlation between Pakistan and Bank is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Telecommunication and Bank of Punjab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Punjab 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 Bank of Punjab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Punjab has no effect on the direction of Pakistan Telecommunicatio i.e., Pakistan Telecommunicatio and Bank of Punjab go up and down completely randomly.

Pair Corralation between Pakistan Telecommunicatio and Bank of Punjab

Assuming the 90 days trading horizon Pakistan Telecommunication is expected to under-perform the Bank of Punjab. But the stock apears to be less risky and, when comparing its historical volatility, Pakistan Telecommunication is 1.34 times less risky than Bank of Punjab. The stock trades about -0.09 of its potential returns per unit of risk. The Bank of Punjab is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  845.00  in Bank of Punjab on December 21, 2024 and sell it today you would earn a total of  318.00  from holding Bank of Punjab or generate 37.63% return on investment over 90 days.

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

Pakistan Telecommunication  vs.  Bank of Punjab

Pakistan Telecommunicatio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pakistan Telecommunication 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 basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Bank of Punjab

Risk-Adjusted Performance

Good

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

Pair Trading with Pakistan Telecommunicatio and Bank of Punjab

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

The idea behind Pakistan Telecommunication and Bank of Punjab 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.