Correlation Between East West and Bank Alfalah
Can any of the company-specific risk be diversified away by investing in both East West and Bank Alfalah 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 East West and Bank Alfalah into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East West Insurance and Bank Alfalah, you can compare the effects of market volatilities on East West and Bank Alfalah 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 East West with a short position of Bank Alfalah. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and Bank Alfalah.
Diversification Opportunities for East West and Bank Alfalah
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between East and Bank is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding East West Insurance and Bank Alfalah in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Alfalah and East West 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 East West Insurance are associated (or correlated) with Bank Alfalah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Alfalah has no effect on the direction of East West i.e., East West and Bank Alfalah go up and down completely randomly.
Pair Corralation between East West and Bank Alfalah
Assuming the 90 days trading horizon East West Insurance is expected to under-perform the Bank Alfalah. But the stock apears to be less risky and, when comparing its historical volatility, East West Insurance is 1.16 times less risky than Bank Alfalah. The stock trades about -0.14 of its potential returns per unit of risk. The Bank Alfalah is currently generating about 0.26 of returns per unit of risk over similar time horizon. 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 Against |
| Strength | Insignificant |
| Accuracy | 69.57% |
| Values | Daily Returns |
East West Insurance vs. Bank Alfalah
Performance |
| Timeline |
| East West Insurance |
| Bank Alfalah |
East West and Bank Alfalah Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and Bank Alfalah
The main advantage of trading using opposite East West and Bank Alfalah positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, Bank Alfalah 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 Bank Alfalah will offset losses from the drop in Bank Alfalah's long position.| East West vs. Habib Insurance | East West vs. Century Insurance | East West vs. Reliance Weaving Mills | East West vs. Media Times |
| Bank Alfalah vs. TPL Insurance | Bank Alfalah vs. Jubilee Life Insurance | Bank Alfalah vs. East West Insurance | Bank Alfalah vs. United 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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