Correlation Between Bank of Punjab and Ghani Chemical
Can any of the company-specific risk be diversified away by investing in both Bank of Punjab and Ghani Chemical 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 Ghani Chemical 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 Ghani Chemical Industries, you can compare the effects of market volatilities on Bank of Punjab and Ghani Chemical 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 Ghani Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Punjab and Ghani Chemical.
Diversification Opportunities for Bank of Punjab and Ghani Chemical
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Ghani is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Punjab and Ghani Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ghani Chemical Industries 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 Ghani Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ghani Chemical Industries has no effect on the direction of Bank of Punjab i.e., Bank of Punjab and Ghani Chemical go up and down completely randomly.
Pair Corralation between Bank of Punjab and Ghani Chemical
Assuming the 90 days trading horizon Bank of Punjab is expected to generate 0.64 times more return on investment than Ghani Chemical. However, Bank of Punjab is 1.56 times less risky than Ghani Chemical. It trades about 0.37 of its potential returns per unit of risk. Ghani Chemical Industries is currently generating about 0.21 per unit of risk. If you would invest 550.00 in Bank of Punjab on August 29, 2024 and sell it today you would earn a total of 135.00 from holding Bank of Punjab or generate 24.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Punjab vs. Ghani Chemical Industries
Performance |
| Timeline |
| Bank of Punjab |
| Ghani Chemical Industries |
Bank of Punjab and Ghani Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Punjab and Ghani Chemical
The main advantage of trading using opposite Bank of Punjab and Ghani Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Punjab position performs unexpectedly, Ghani Chemical 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 Ghani Chemical will offset losses from the drop in Ghani Chemical's long position.| Bank of Punjab vs. Matco Foods | Bank of Punjab vs. JS Investments | Bank of Punjab vs. Hi Tech Lubricants | Bank of Punjab vs. The Organic Meat |
| Ghani Chemical vs. Habib Insurance | Ghani Chemical vs. Century Insurance | Ghani Chemical vs. Reliance Weaving Mills | Ghani Chemical vs. Media Times |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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