Correlation Between Pakistan Telecommunicatio and Meezan Bank

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

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

Diversification Opportunities for Pakistan Telecommunicatio and Meezan Bank

0.05

Correlation Coefficient

Pakistan Telecommunicatio  Meezan Bank

Significant diversification

The 3 months correlation between Pakistan and Meezan is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Telecommunication and Meezan Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meezan Bank 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 Meezan Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meezan Bank has no effect on the direction of Pakistan Telecommunicatio i.e., Pakistan Telecommunicatio and Meezan Bank go up and down completely randomly.

Pair Corralation between Pakistan Telecommunicatio and Meezan Bank

Assuming the 90 days trading horizon Pakistan Telecommunication is expected to under-perform the Meezan Bank. In addition to that, Pakistan Telecommunicatio is 1.13 times more volatile than Meezan Bank. It trades about -0.24 of its total potential returns per unit of risk. Meezan Bank is currently generating about 0.23 per unit of volatility. If you would invest  22,096  in Meezan Bank on October 23, 2024 and sell it today you would earn a total of  1,972  from holding Meezan Bank or generate 8.92% return on investment over 90 days.

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

Pakistan Telecommunication  vs.  Meezan Bank

Pakistan Telecommunicatio

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Telecommunication are ranked lower than 15 (%) 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.

Meezan Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Meezan Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Meezan Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pakistan Telecommunicatio and Meezan Bank

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

The idea behind Pakistan Telecommunication and Meezan Bank 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.