Correlation Between Shell Pakistan and K Electric

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

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

Diversification Opportunities for Shell Pakistan and K Electric

-0.23

Correlation Coefficient

Shell Pakistan  K Electric

Very good diversification

The 3 months correlation between Shell and KEL is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Shell Pakistan and K Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K Electric and Shell Pakistan 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 Shell Pakistan are associated (or correlated) with K Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K Electric has no effect on the direction of Shell Pakistan i.e., Shell Pakistan and K Electric go up and down completely randomly.

Pair Corralation between Shell Pakistan and K Electric

Assuming the 90 days trading horizon Shell Pakistan is expected to generate 1.06 times more return on investment than K Electric. However, Shell Pakistan is 1.06 times more volatile than K Electric. It trades about -0.1 of its potential returns per unit of risk. K Electric is currently generating about -0.11 per unit of risk. If you would invest  21,447  in Shell Pakistan on December 29, 2024 and sell it today you would lose (2,946) from holding Shell Pakistan or give up 13.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	69.84%
Values	Daily Returns

Shell Pakistan  vs.  K Electric

Shell Pakistan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shell Pakistan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

K Electric

Risk-Adjusted Performance

Very Weak

Over the last 90 days K Electric 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.

Pair Trading with Shell Pakistan and K Electric

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

The idea behind Shell Pakistan and K Electric 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.