Correlation Between Allied Bank and Pakistan Aluminium
Can any of the company-specific risk be diversified away by investing in both Allied Bank and Pakistan Aluminium 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 Pakistan Aluminium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allied Bank and Pakistan Aluminium Beverage, you can compare the effects of market volatilities on Allied Bank and Pakistan Aluminium 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 Pakistan Aluminium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Bank and Pakistan Aluminium.
Diversification Opportunities for Allied Bank and Pakistan Aluminium
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Allied and Pakistan is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Allied Bank and Pakistan Aluminium Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Aluminium 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 Pakistan Aluminium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Aluminium has no effect on the direction of Allied Bank i.e., Allied Bank and Pakistan Aluminium go up and down completely randomly.
Pair Corralation between Allied Bank and Pakistan Aluminium
Assuming the 90 days trading horizon Allied Bank is expected to generate 2.18 times less return on investment than Pakistan Aluminium. But when comparing it to its historical volatility, Allied Bank is 1.56 times less risky than Pakistan Aluminium. It trades about 0.37 of its potential returns per unit of risk. Pakistan Aluminium Beverage is currently generating about 0.52 of returns per unit of risk over similar time horizon. If you would invest 8,348 in Pakistan Aluminium Beverage on September 13, 2024 and sell it today you would earn a total of 4,448 from holding Pakistan Aluminium Beverage or generate 53.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allied Bank vs. Pakistan Aluminium Beverage
Performance |
| Timeline |
| Allied Bank |
| Pakistan Aluminium |
Allied Bank and Pakistan Aluminium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allied Bank and Pakistan Aluminium
The main advantage of trading using opposite Allied Bank and Pakistan Aluminium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Bank position performs unexpectedly, Pakistan Aluminium 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 Aluminium will offset losses from the drop in Pakistan Aluminium's long position.| Allied Bank vs. Security Investment Bank | Allied Bank vs. Pakistan Telecommunication | Allied Bank vs. Hi Tech Lubricants | Allied Bank vs. United Insurance |
| Pakistan Aluminium vs. Habib Insurance | Pakistan Aluminium vs. Ghandhara Automobile | Pakistan Aluminium vs. Century Insurance | Pakistan Aluminium vs. Reliance Weaving Mills |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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