Correlation Between Roshan Packages and Pakistan State

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

Diversification Opportunities for Roshan Packages and Pakistan State

0.74

Correlation Coefficient

Roshan Packages  Pakistan State

Poor diversification

The 3 months correlation between Roshan and Pakistan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Roshan Packages and Pakistan State Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan State Oil 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 State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan State Oil has no effect on the direction of Roshan Packages i.e., Roshan Packages and Pakistan State go up and down completely randomly.

Pair Corralation between Roshan Packages and Pakistan State

Assuming the 90 days trading horizon Roshan Packages is expected to generate 3.38 times less return on investment than Pakistan State. In addition to that, Roshan Packages is 1.05 times more volatile than Pakistan State Oil. It trades about 0.11 of its total potential returns per unit of risk. Pakistan State Oil is currently generating about 0.4 per unit of volatility. If you would invest  15,733  in Pakistan State Oil on September 13, 2024 and sell it today you would earn a total of  15,263  from holding Pakistan State Oil or generate 97.01% return on investment over 90 days.

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

Roshan Packages  vs.  Pakistan State Oil

Roshan Packages

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Roshan Packages are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Roshan Packages reported solid returns over the last few months and may actually be approaching a breakup point.

Pakistan State Oil

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan State Oil are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Pakistan State reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Roshan Packages and Pakistan State

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

The idea behind Roshan Packages and Pakistan State Oil 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.