Correlation Between Faysal Bank and Meezan Bank
Can any of the company-specific risk be diversified away by investing in both Faysal Bank and Meezan 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 Faysal Bank and Meezan Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Faysal Bank and Meezan Bank, you can compare the effects of market volatilities on Faysal Bank and Meezan 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 Faysal Bank with a short position of Meezan Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faysal Bank and Meezan Bank.
Diversification Opportunities for Faysal Bank and Meezan Bank
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Faysal and Meezan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Faysal Bank and Meezan Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meezan Bank and Faysal Bank 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 Faysal Bank are associated (or correlated) with Meezan Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meezan Bank has no effect on the direction of Faysal Bank i.e., Faysal Bank and Meezan Bank go up and down completely randomly.
Pair Corralation between Faysal Bank and Meezan Bank
Assuming the 90 days trading horizon Faysal Bank is expected to generate 1.37 times more return on investment than Meezan Bank. However, Faysal Bank is 1.37 times more volatile than Meezan Bank. It trades about 0.1 of its potential returns per unit of risk. Meezan Bank is currently generating about 0.1 per unit of risk. If you would invest 2,818 in Faysal Bank on September 2, 2024 and sell it today you would earn a total of 1,935 from holding Faysal Bank or generate 68.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Faysal Bank vs. Meezan Bank
Performance |
| Timeline |
| Faysal Bank |
| Meezan Bank |
Faysal Bank and Meezan Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Faysal Bank and Meezan Bank
The main advantage of trading using opposite Faysal Bank and Meezan Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faysal Bank position performs unexpectedly, Meezan 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 Meezan Bank will offset losses from the drop in Meezan Bank's long position.| Faysal Bank vs. Masood Textile Mills | Faysal Bank vs. Fauji Foods | Faysal Bank vs. KSB Pumps | Faysal Bank vs. Mari Petroleum |
| Meezan Bank vs. Masood Textile Mills | Meezan Bank vs. Fauji Foods | Meezan Bank vs. KSB Pumps | Meezan Bank vs. Mari Petroleum |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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