Correlation Between Bank Alfalah and KOT Addu
Can any of the company-specific risk be diversified away by investing in both Bank Alfalah and KOT Addu 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 KOT Addu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Alfalah and KOT Addu Power, you can compare the effects of market volatilities on Bank Alfalah and KOT Addu 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 KOT Addu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Alfalah and KOT Addu.
Diversification Opportunities for Bank Alfalah and KOT Addu
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and KOT is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Bank Alfalah and KOT Addu Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KOT Addu Power 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 KOT Addu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KOT Addu Power has no effect on the direction of Bank Alfalah i.e., Bank Alfalah and KOT Addu go up and down completely randomly.
Pair Corralation between Bank Alfalah and KOT Addu
Assuming the 90 days trading horizon Bank Alfalah is expected to generate 1.13 times less return on investment than KOT Addu. In addition to that, Bank Alfalah is 1.13 times more volatile than KOT Addu Power. It trades about 0.33 of its total potential returns per unit of risk. KOT Addu Power is currently generating about 0.42 per unit of volatility. If you would invest 2,901 in KOT Addu Power on September 3, 2024 and sell it today you would earn a total of 733.00 from holding KOT Addu Power or generate 25.27% 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. KOT Addu Power
Performance |
| Timeline |
| Bank Alfalah |
| KOT Addu Power |
Bank Alfalah and KOT Addu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Alfalah and KOT Addu
The main advantage of trading using opposite Bank Alfalah and KOT Addu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Alfalah position performs unexpectedly, KOT Addu 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 KOT Addu will offset losses from the drop in KOT Addu's long position.| Bank Alfalah vs. Reliance Insurance Co | Bank Alfalah vs. Air Link Communication | Bank Alfalah vs. Century Insurance | Bank Alfalah vs. Habib Insurance |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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