Correlation Between Roshan Packages and Pakistan Reinsurance

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

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

Diversification Opportunities for Roshan Packages and Pakistan Reinsurance

-0.17

Correlation Coefficient

Roshan Packages  Pakistan Reinsurance

Good diversification

The 3 months correlation between Roshan and Pakistan is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Roshan Packages and Pakistan Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Reinsurance and Roshan Packages 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 Roshan Packages are associated (or correlated) with Pakistan Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Reinsurance has no effect on the direction of Roshan Packages i.e., Roshan Packages and Pakistan Reinsurance go up and down completely randomly.

Pair Corralation between Roshan Packages and Pakistan Reinsurance

Assuming the 90 days trading horizon Roshan Packages is expected to under-perform the Pakistan Reinsurance. In addition to that, Roshan Packages is 1.53 times more volatile than Pakistan Reinsurance. It trades about -0.11 of its total potential returns per unit of risk. Pakistan Reinsurance is currently generating about 0.03 per unit of volatility. If you would invest  1,533  in Pakistan Reinsurance on December 23, 2024 and sell it today you would earn a total of  29.00  from holding Pakistan Reinsurance or generate 1.89% return on investment over 90 days.

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

Roshan Packages  vs.  Pakistan Reinsurance

Roshan Packages

Risk-Adjusted Performance

Very Weak

Over the last 90 days Roshan Packages 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.

Pakistan Reinsurance

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Reinsurance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Pakistan Reinsurance is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Roshan Packages and Pakistan Reinsurance

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

The idea behind Roshan Packages and Pakistan Reinsurance 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.