Correlation Between Al Khair and Pakistan Refinery

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

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

Diversification Opportunities for Al Khair and Pakistan Refinery

0.65

Correlation Coefficient

Al Khair  Pakistan Refinery

Poor diversification

The 3 months correlation between AKGL and Pakistan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Al Khair Gadoon Limited and Pakistan Refinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Refinery and Al Khair 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 Al Khair Gadoon Limited are associated (or correlated) with Pakistan Refinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Refinery has no effect on the direction of Al Khair i.e., Al Khair and Pakistan Refinery go up and down completely randomly.

Pair Corralation between Al Khair and Pakistan Refinery

Assuming the 90 days trading horizon Al Khair Gadoon Limited is expected to generate 1.78 times more return on investment than Pakistan Refinery. However, Al Khair is 1.78 times more volatile than Pakistan Refinery. It trades about 0.15 of its potential returns per unit of risk. Pakistan Refinery is currently generating about 0.21 per unit of risk. If you would invest  3,499  in Al Khair Gadoon Limited on September 12, 2024 and sell it today you would earn a total of  536.00  from holding Al Khair Gadoon Limited or generate 15.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	33.33%
Values	Daily Returns

Al Khair Gadoon Limited  vs.  Pakistan Refinery

Al Khair Gadoon

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Al Khair Gadoon Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Al Khair sustained solid returns over the last few months and may actually be approaching a breakup point.

Pakistan Refinery

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Refinery are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Pakistan Refinery reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Al Khair and Pakistan Refinery

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

The idea behind Al Khair Gadoon Limited and Pakistan Refinery 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 Commodity Directory module to find actively traded commodities issued by global exchanges.