Correlation Between Allied Bank and National Refinery
Can any of the company-specific risk be diversified away by investing in both Allied Bank and National 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 Allied Bank and National Refinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allied Bank and National Refinery, you can compare the effects of market volatilities on Allied Bank and National 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 Allied Bank with a short position of National Refinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Bank and National Refinery.
Diversification Opportunities for Allied Bank and National Refinery
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Allied and National is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Allied Bank and National Refinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Refinery 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 National Refinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Refinery has no effect on the direction of Allied Bank i.e., Allied Bank and National Refinery go up and down completely randomly.
Pair Corralation between Allied Bank and National Refinery
Assuming the 90 days trading horizon Allied Bank is expected to generate 0.69 times more return on investment than National Refinery. However, Allied Bank is 1.44 times less risky than National Refinery. It trades about 0.21 of its potential returns per unit of risk. National Refinery is currently generating about -0.04 per unit of risk. If you would invest 9,148 in Allied Bank on September 2, 2024 and sell it today you would earn a total of 5,227 from holding Allied Bank or generate 57.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allied Bank vs. National Refinery
Performance |
| Timeline |
| Allied Bank |
| National Refinery |
Allied Bank and National Refinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allied Bank and National Refinery
The main advantage of trading using opposite Allied Bank and National Refinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Bank position performs unexpectedly, National 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 National Refinery will offset losses from the drop in National Refinery's long position.| Allied Bank vs. Wah Nobel Chemicals | Allied Bank vs. AKD Hospitality | Allied Bank vs. Adamjee Insurance | Allied Bank vs. Hi Tech Lubricants |
| National Refinery vs. Security Investment Bank | National Refinery vs. TPL Insurance | National Refinery vs. Pakistan Telecommunication | National Refinery vs. JS Investments |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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