Correlation Between Air Link and Pakistan Petroleum

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

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

Diversification Opportunities for Air Link and Pakistan Petroleum

-0.37

Correlation Coefficient

Air Link  Pakistan Petroleum

Very good diversification

The 3 months correlation between Air and Pakistan is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Air Link Communication and Pakistan Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Petroleum and Air Link 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 Air Link Communication are associated (or correlated) with Pakistan Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Petroleum has no effect on the direction of Air Link i.e., Air Link and Pakistan Petroleum go up and down completely randomly.

Pair Corralation between Air Link and Pakistan Petroleum

Assuming the 90 days trading horizon Air Link Communication is expected to generate 1.22 times more return on investment than Pakistan Petroleum. However, Air Link is 1.22 times more volatile than Pakistan Petroleum. It trades about 0.13 of its potential returns per unit of risk. Pakistan Petroleum is currently generating about 0.11 per unit of risk. If you would invest  2,365  in Air Link Communication on September 2, 2024 and sell it today you would earn a total of  11,269  from holding Air Link Communication or generate 476.49% return on investment over 90 days.

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

Air Link Communication  vs.  Pakistan Petroleum

Air Link Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Link Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Air Link is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pakistan Petroleum

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Petroleum are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Pakistan Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Link and Pakistan Petroleum

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

The idea behind Air Link Communication and Pakistan Petroleum 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..