Correlation Between Bank of Punjab and United Bank
Can any of the company-specific risk be diversified away by investing in both Bank of Punjab and United 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 United 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 United Bank, you can compare the effects of market volatilities on Bank of Punjab and United 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 United Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Punjab and United Bank.
Diversification Opportunities for Bank of Punjab and United Bank
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and United is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Punjab and United Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United 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 United Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Bank has no effect on the direction of Bank of Punjab i.e., Bank of Punjab and United Bank go up and down completely randomly.
Pair Corralation between Bank of Punjab and United Bank
Assuming the 90 days trading horizon Bank of Punjab is expected to generate 1.23 times less return on investment than United Bank. In addition to that, Bank of Punjab is 1.65 times more volatile than United Bank. It trades about 0.06 of its total potential returns per unit of risk. United Bank is currently generating about 0.11 per unit of volatility. If you would invest 36,730 in United Bank on October 9, 2024 and sell it today you would earn a total of 1,812 from holding United Bank or generate 4.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Punjab vs. United Bank
Performance |
| Timeline |
| Bank of Punjab |
| United Bank |
Bank of Punjab and United Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Punjab and United Bank
The main advantage of trading using opposite Bank of Punjab and United Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Punjab position performs unexpectedly, United 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 United Bank will offset losses from the drop in United Bank's long position.| Bank of Punjab vs. Pakistan Hotel Developers | Bank of Punjab vs. Allied Bank | Bank of Punjab vs. Soneri Bank | Bank of Punjab vs. Pakistan Aluminium Beverage |
| United Bank vs. Wah Nobel Chemicals | United Bank vs. Lotte Chemical Pakistan | United Bank vs. Shaheen Insurance | United Bank vs. Century Insurance |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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