Correlation Between Bank of Punjab and Allied Bank
Can any of the company-specific risk be diversified away by investing in both Bank of Punjab and Allied 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 of Punjab and Allied Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of Punjab and Allied Bank, you can compare the effects of market volatilities on Bank of Punjab and Allied 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 of Punjab with a short position of Allied Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Punjab and Allied Bank.
Diversification Opportunities for Bank of Punjab and Allied Bank
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Allied is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Punjab and Allied Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Bank and Bank of Punjab 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 of Punjab are associated (or correlated) with Allied Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Bank has no effect on the direction of Bank of Punjab i.e., Bank of Punjab and Allied Bank go up and down completely randomly.
Pair Corralation between Bank of Punjab and Allied Bank
Assuming the 90 days trading horizon Bank of Punjab is expected to generate 1.51 times less return on investment than Allied Bank. In addition to that, Bank of Punjab is 1.7 times more volatile than Allied Bank. It trades about 0.05 of its total potential returns per unit of risk. Allied Bank is currently generating about 0.14 per unit of volatility. If you would invest 4,674 in Allied Bank on August 28, 2024 and sell it today you would earn a total of 7,527 from holding Allied Bank or generate 161.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.04% |
| Values | Daily Returns |
Bank of Punjab vs. Allied Bank
Performance |
| Timeline |
| Bank of Punjab |
| Allied Bank |
Bank of Punjab and Allied Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Punjab and Allied Bank
The main advantage of trading using opposite Bank of Punjab and Allied Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Punjab position performs unexpectedly, Allied 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 Allied Bank will offset losses from the drop in Allied Bank's long position.| Bank of Punjab vs. National Bank of | Bank of Punjab vs. Meezan Bank | Bank of Punjab vs. Bank Al Habib | Bank of Punjab vs. Habib Metropolitan Bank |
| Allied Bank vs. National Bank of | Allied Bank vs. Meezan Bank | Allied Bank vs. Bank Al Habib | Allied Bank vs. Habib Metropolitan 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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