Correlation Between EFU General and Habib Bank
Can any of the company-specific risk be diversified away by investing in both EFU General and Habib 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 EFU General and Habib Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EFU General Insurance and Habib Bank, you can compare the effects of market volatilities on EFU General and Habib 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 EFU General with a short position of Habib Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of EFU General and Habib Bank.
Diversification Opportunities for EFU General and Habib Bank
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between EFU and Habib is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and Habib Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Bank and EFU General 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 EFU General Insurance are associated (or correlated) with Habib Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Bank has no effect on the direction of EFU General i.e., EFU General and Habib Bank go up and down completely randomly.
Pair Corralation between EFU General and Habib Bank
Assuming the 90 days trading horizon EFU General Insurance is expected to generate 1.89 times more return on investment than Habib Bank. However, EFU General is 1.89 times more volatile than Habib Bank. It trades about 0.34 of its potential returns per unit of risk. Habib Bank is currently generating about 0.09 per unit of risk. If you would invest 8,909 in EFU General Insurance on August 25, 2024 and sell it today you would earn a total of 3,591 from holding EFU General Insurance or generate 40.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EFU General Insurance vs. Habib Bank
Performance |
| Timeline |
| EFU General Insurance |
| Habib Bank |
EFU General and Habib Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EFU General and Habib Bank
The main advantage of trading using opposite EFU General and Habib Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EFU General position performs unexpectedly, Habib 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 Habib Bank will offset losses from the drop in Habib Bank's long position.| EFU General vs. Habib Bank | EFU General vs. National Bank of | EFU General vs. United Bank | EFU General vs. MCB Bank |
| Habib Bank vs. JS Investments | Habib Bank vs. Unity Foods | Habib Bank vs. Unilever Pakistan Foods | Habib Bank vs. Big Bird Foods |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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