Correlation Between Allied Bank and Lucky Cement
Can any of the company-specific risk be diversified away by investing in both Allied Bank and Lucky Cement 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 Allied Bank and Lucky Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allied Bank and Lucky Cement, you can compare the effects of market volatilities on Allied Bank and Lucky Cement 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 Allied Bank with a short position of Lucky Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Bank and Lucky Cement.
Diversification Opportunities for Allied Bank and Lucky Cement
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Allied and Lucky is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Allied Bank and Lucky Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucky Cement and Allied Bank 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 Allied Bank are associated (or correlated) with Lucky Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucky Cement has no effect on the direction of Allied Bank i.e., Allied Bank and Lucky Cement go up and down completely randomly.
Pair Corralation between Allied Bank and Lucky Cement
Assuming the 90 days trading horizon Allied Bank is expected to generate 1.19 times less return on investment than Lucky Cement. But when comparing it to its historical volatility, Allied Bank is 1.04 times less risky than Lucky Cement. It trades about 0.13 of its potential returns per unit of risk. Lucky Cement is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 40,096 in Lucky Cement on December 1, 2024 and sell it today you would earn a total of 102,320 from holding Lucky Cement or generate 255.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.85% |
| Values | Daily Returns |
Allied Bank vs. Lucky Cement
Performance |
| Timeline |
| Allied Bank |
| Lucky Cement |
Allied Bank and Lucky Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allied Bank and Lucky Cement
The main advantage of trading using opposite Allied Bank and Lucky Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Bank position performs unexpectedly, Lucky Cement 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 Lucky Cement will offset losses from the drop in Lucky Cement's long position.| Allied Bank vs. Habib Bank | Allied Bank vs. National Bank of | Allied Bank vs. United Bank | Allied Bank vs. MCB Bank |
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Check out your portfolio center.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.
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