Correlation Between Pakistan Telecommunicatio and United Bank

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

Diversification Opportunities for Pakistan Telecommunicatio and United Bank

-0.58

Correlation Coefficient

Pakistan Telecommunicatio  United Bank

Excellent diversification

The 3 months correlation between Pakistan and United is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Telecommunication and United Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United 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 United Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Bank has no effect on the direction of Pakistan Telecommunicatio i.e., Pakistan Telecommunicatio and United Bank go up and down completely randomly.

Pair Corralation between Pakistan Telecommunicatio and United Bank

Assuming the 90 days trading horizon Pakistan Telecommunication is expected to under-perform the United Bank. In addition to that, Pakistan Telecommunicatio is 1.58 times more volatile than United Bank. It trades about -0.06 of its total potential returns per unit of risk. United Bank is currently generating about 0.09 per unit of volatility. If you would invest  35,516  in United Bank on December 24, 2024 and sell it today you would earn a total of  2,727  from holding United Bank or generate 7.68% return on investment over 90 days.

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

Pakistan Telecommunication  vs.  United Bank

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 latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

United Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, United Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pakistan Telecommunicatio and United Bank

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

The idea behind Pakistan Telecommunication and United 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.