Correlation Between Allied Bank and ZAHIDJEE Textile
Can any of the company-specific risk be diversified away by investing in both Allied Bank and ZAHIDJEE Textile 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 ZAHIDJEE Textile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allied Bank and ZAHIDJEE Textile Mills, you can compare the effects of market volatilities on Allied Bank and ZAHIDJEE Textile 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 ZAHIDJEE Textile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Bank and ZAHIDJEE Textile.
Diversification Opportunities for Allied Bank and ZAHIDJEE Textile
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Allied and ZAHIDJEE is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Allied Bank and ZAHIDJEE Textile Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZAHIDJEE Textile Mills 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 ZAHIDJEE Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZAHIDJEE Textile Mills has no effect on the direction of Allied Bank i.e., Allied Bank and ZAHIDJEE Textile go up and down completely randomly.
Pair Corralation between Allied Bank and ZAHIDJEE Textile
Assuming the 90 days trading horizon Allied Bank is expected to generate 0.35 times more return on investment than ZAHIDJEE Textile. However, Allied Bank is 2.84 times less risky than ZAHIDJEE Textile. It trades about 0.17 of its potential returns per unit of risk. ZAHIDJEE Textile Mills is currently generating about 0.04 per unit of risk. If you would invest 4,710 in Allied Bank on September 3, 2024 and sell it today you would earn a total of 10,290 from holding Allied Bank or generate 218.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 49.32% |
| Values | Daily Returns |
Allied Bank vs. ZAHIDJEE Textile Mills
Performance |
| Timeline |
| Allied Bank |
| ZAHIDJEE Textile Mills |
Allied Bank and ZAHIDJEE Textile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allied Bank and ZAHIDJEE Textile
The main advantage of trading using opposite Allied Bank and ZAHIDJEE Textile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Bank position performs unexpectedly, ZAHIDJEE Textile 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 ZAHIDJEE Textile will offset losses from the drop in ZAHIDJEE Textile's long position.| Allied Bank vs. Ghandhara Automobile | Allied Bank vs. Honda Atlas Cars | Allied Bank vs. Reliance Insurance Co | Allied Bank vs. Silkbank |
| ZAHIDJEE Textile vs. Masood Textile Mills | ZAHIDJEE Textile vs. Fauji Foods | ZAHIDJEE Textile vs. KSB Pumps | ZAHIDJEE Textile vs. Mari Petroleum |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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