Correlation Between Allied Bank and Pakistan International
Can any of the company-specific risk be diversified away by investing in both Allied Bank and Pakistan International 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 International 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 International Bulk, you can compare the effects of market volatilities on Allied Bank and Pakistan International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Bank and Pakistan International.
Diversification Opportunities for Allied Bank and Pakistan International
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Allied and Pakistan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Allied Bank and Pakistan International Bulk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan International has no effect on the direction of Allied Bank i.e., Allied Bank and Pakistan International go up and down completely randomly.
Pair Corralation between Allied Bank and Pakistan International
Assuming the 90 days trading horizon Allied Bank is expected to generate 0.56 times more return on investment than Pakistan International. However, Allied Bank is 1.79 times less risky than Pakistan International. It trades about 0.37 of its potential returns per unit of risk. Pakistan International Bulk is currently generating about 0.15 per unit of risk. If you would invest 11,451 in Allied Bank on September 13, 2024 and sell it today you would earn a total of 2,504 from holding Allied Bank or generate 21.87% 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 International Bulk
Performance |
| Timeline |
| Allied Bank |
| Pakistan International |
Allied Bank and Pakistan International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allied Bank and Pakistan International
The main advantage of trading using opposite Allied Bank and Pakistan International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Bank position performs unexpectedly, Pakistan International 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 International will offset losses from the drop in Pakistan International'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 International vs. The Organic Meat | Pakistan International vs. National Foods | Pakistan International vs. Air Link Communication | Pakistan International vs. Big Bird Foods |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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