Correlation Between First Credit and Pakistan Refinery

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

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

Diversification Opportunities for First Credit and Pakistan Refinery

-0.25

Correlation Coefficient

First Credit  Pakistan Refinery

Very good diversification

The 3 months correlation between First and Pakistan is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding First Credit And and Pakistan Refinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Refinery and First Credit 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 First Credit And 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 First Credit i.e., First Credit and Pakistan Refinery go up and down completely randomly.

Pair Corralation between First Credit and Pakistan Refinery

Assuming the 90 days trading horizon First Credit is expected to generate 10.48 times less return on investment than Pakistan Refinery. In addition to that, First Credit is 1.41 times more volatile than Pakistan Refinery. It trades about 0.02 of its total potential returns per unit of risk. Pakistan Refinery is currently generating about 0.23 per unit of volatility. If you would invest  2,236  in Pakistan Refinery on September 14, 2024 and sell it today you would earn a total of  1,219  from holding Pakistan Refinery or generate 54.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.06%
Values	Daily Returns

First Credit And  vs.  Pakistan Refinery

First Credit And

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Credit And are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, First Credit is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pakistan Refinery

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Refinery are ranked lower than 18 (%) 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 First Credit and Pakistan Refinery

The main advantage of trading using opposite First Credit and Pakistan Refinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Credit 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 First Credit And 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.