Correlation Between Bank Alfalah and National Refinery
Can any of the company-specific risk be diversified away by investing in both Bank Alfalah and National Refinery 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 National Refinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Alfalah and National Refinery, you can compare the effects of market volatilities on Bank Alfalah and National Refinery 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 National Refinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Alfalah and National Refinery.
Diversification Opportunities for Bank Alfalah and National Refinery
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and National is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bank Alfalah and National Refinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Refinery 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 National Refinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Refinery has no effect on the direction of Bank Alfalah i.e., Bank Alfalah and National Refinery go up and down completely randomly.
Pair Corralation between Bank Alfalah and National Refinery
Assuming the 90 days trading horizon Bank Alfalah is expected to generate 0.96 times more return on investment than National Refinery. However, Bank Alfalah is 1.04 times less risky than National Refinery. It trades about 0.26 of its potential returns per unit of risk. National Refinery is currently generating about 0.21 per unit of risk. If you would invest 6,650 in Bank Alfalah on August 31, 2024 and sell it today you would earn a total of 1,194 from holding Bank Alfalah or generate 17.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Alfalah vs. National Refinery
Performance |
| Timeline |
| Bank Alfalah |
| National Refinery |
Bank Alfalah and National Refinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Alfalah and National Refinery
The main advantage of trading using opposite Bank Alfalah and National Refinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Alfalah position performs unexpectedly, National Refinery 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 National Refinery will offset losses from the drop in National Refinery's long position.| Bank Alfalah vs. TPL Insurance | Bank Alfalah vs. Jubilee Life Insurance | Bank Alfalah vs. East West Insurance | Bank Alfalah vs. United Insurance |
| National Refinery vs. National Bank of | National Refinery vs. United Bank | National Refinery vs. Bank Alfalah | National Refinery vs. Allied Bank |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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