Correlation Between Allied Bank and Sardar Chemical
Can any of the company-specific risk be diversified away by investing in both Allied Bank and Sardar Chemical 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 Sardar Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allied Bank and Sardar Chemical Industries, you can compare the effects of market volatilities on Allied Bank and Sardar Chemical 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 Sardar Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Bank and Sardar Chemical.
Diversification Opportunities for Allied Bank and Sardar Chemical
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Allied and Sardar is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Allied Bank and Sardar Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sardar Chemical Indu 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 Sardar Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sardar Chemical Indu has no effect on the direction of Allied Bank i.e., Allied Bank and Sardar Chemical go up and down completely randomly.
Pair Corralation between Allied Bank and Sardar Chemical
Assuming the 90 days trading horizon Allied Bank is expected to generate 0.56 times more return on investment than Sardar Chemical. However, Allied Bank is 1.8 times less risky than Sardar Chemical. It trades about 0.11 of its potential returns per unit of risk. Sardar Chemical Industries is currently generating about 0.05 per unit of risk. If you would invest 10,177 in Allied Bank on October 13, 2024 and sell it today you would earn a total of 3,390 from holding Allied Bank or generate 33.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 63.12% |
| Values | Daily Returns |
Allied Bank vs. Sardar Chemical Industries
Performance |
| Timeline |
| Allied Bank |
| Sardar Chemical Indu |
Allied Bank and Sardar Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allied Bank and Sardar Chemical
The main advantage of trading using opposite Allied Bank and Sardar Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Bank position performs unexpectedly, Sardar Chemical 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 Sardar Chemical will offset losses from the drop in Sardar Chemical's long position.| Allied Bank vs. Matco Foods | Allied Bank vs. Pakistan Reinsurance | Allied Bank vs. JS Investments | Allied Bank vs. Premier Insurance |
| Sardar Chemical vs. Habib Insurance | Sardar Chemical vs. Ghandhara Automobile | Sardar Chemical vs. Shadab Textile Mills | Sardar Chemical vs. Century Insurance |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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