Correlation Between Bank Alfalah and Faysal Bank
Can any of the company-specific risk be diversified away by investing in both Bank Alfalah and Faysal Bank 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 Bank Alfalah and Faysal Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Alfalah and Faysal Bank, you can compare the effects of market volatilities on Bank Alfalah and Faysal Bank 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 Bank Alfalah with a short position of Faysal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Alfalah and Faysal Bank.
Diversification Opportunities for Bank Alfalah and Faysal Bank
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Faysal is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Bank Alfalah and Faysal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faysal Bank and Bank Alfalah 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 Bank Alfalah are associated (or correlated) with Faysal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faysal Bank has no effect on the direction of Bank Alfalah i.e., Bank Alfalah and Faysal Bank go up and down completely randomly.
Pair Corralation between Bank Alfalah and Faysal Bank
Assuming the 90 days trading horizon Bank Alfalah is expected to generate 1.23 times less return on investment than Faysal Bank. But when comparing it to its historical volatility, Bank Alfalah is 1.2 times less risky than Faysal Bank. It trades about 0.14 of its potential returns per unit of risk. Faysal Bank is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,331 in Faysal Bank on August 25, 2024 and sell it today you would earn a total of 2,882 from holding Faysal Bank or generate 123.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Alfalah vs. Faysal Bank
Performance |
| Timeline |
| Bank Alfalah |
| Faysal Bank |
Bank Alfalah and Faysal Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Alfalah and Faysal Bank
The main advantage of trading using opposite Bank Alfalah and Faysal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Alfalah position performs unexpectedly, Faysal Bank 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 Faysal Bank will offset losses from the drop in Faysal Bank's long position.| Bank Alfalah vs. Habib Bank | Bank Alfalah vs. National Bank of | Bank Alfalah vs. MCB Bank | Bank Alfalah vs. Meezan Bank |
| Faysal Bank vs. Masood Textile Mills | Faysal Bank vs. Fauji Foods | Faysal Bank vs. KSB Pumps | Faysal Bank 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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