Correlation Between Roshan Packages and Pakistan Telecommunicatio

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

Diversification Opportunities for Roshan Packages and Pakistan Telecommunicatio

0.84

Correlation Coefficient

Roshan Packages  Pakistan Telecommunicatio

Very poor diversification

The 3 months correlation between Roshan and Pakistan is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Roshan Packages and Pakistan Telecommunication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Telecommunicatio 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 Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Telecommunicatio has no effect on the direction of Roshan Packages i.e., Roshan Packages and Pakistan Telecommunicatio go up and down completely randomly.

Pair Corralation between Roshan Packages and Pakistan Telecommunicatio

Assuming the 90 days trading horizon Roshan Packages is expected to under-perform the Pakistan Telecommunicatio. But the stock apears to be less risky and, when comparing its historical volatility, Roshan Packages is 1.36 times less risky than Pakistan Telecommunicatio. The stock trades about -0.03 of its potential returns per unit of risk. The Pakistan Telecommunication is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,559  in Pakistan Telecommunication on October 9, 2024 and sell it today you would lose (62.00) from holding Pakistan Telecommunication or give up 2.42% of portfolio value over 90 days.

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

Roshan Packages  vs.  Pakistan Telecommunication

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 Telecommunicatio

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Telecommunication are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Pakistan Telecommunicatio reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Roshan Packages and Pakistan Telecommunicatio

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

The idea behind Roshan Packages and Pakistan Telecommunication 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.