Correlation Between Allied Bank and Packages
Can any of the company-specific risk be diversified away by investing in both Allied Bank and Packages 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 Packages into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allied Bank and Packages, you can compare the effects of market volatilities on Allied Bank and Packages 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 Packages. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Bank and Packages.
Diversification Opportunities for Allied Bank and Packages
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Allied and Packages is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Allied Bank and Packages in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Packages 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 Packages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Packages has no effect on the direction of Allied Bank i.e., Allied Bank and Packages go up and down completely randomly.
Pair Corralation between Allied Bank and Packages
Assuming the 90 days trading horizon Allied Bank is expected to generate 1.4 times less return on investment than Packages. But when comparing it to its historical volatility, Allied Bank is 1.19 times less risky than Packages. It trades about 0.37 of its potential returns per unit of risk. Packages is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 49,497 in Packages on September 13, 2024 and sell it today you would earn a total of 15,759 from holding Packages or generate 31.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allied Bank vs. Packages
Performance |
| Timeline |
| Allied Bank |
| Packages |
Allied Bank and Packages Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allied Bank and Packages
The main advantage of trading using opposite Allied Bank and Packages positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Bank position performs unexpectedly, Packages 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 Packages will offset losses from the drop in Packages' long position.| Allied Bank vs. Security Investment Bank | Allied Bank vs. Pakistan Telecommunication | Allied Bank vs. Hi Tech Lubricants | Allied Bank vs. United Insurance |
| Packages vs. Oil and Gas | Packages vs. Pakistan State Oil | Packages vs. Pakistan Petroleum | Packages vs. Fauji Fertilizer |
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 Stocks Directory module to find actively traded stocks across global markets.
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