Correlation Between Faysal Bank and National Bank
Can any of the company-specific risk be diversified away by investing in both Faysal Bank and National 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 National 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 National Bank of, you can compare the effects of market volatilities on Faysal Bank and National 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 National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faysal Bank and National Bank.
Diversification Opportunities for Faysal Bank and National Bank
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Faysal and National is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Faysal Bank and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of Faysal Bank i.e., Faysal Bank and National Bank go up and down completely randomly.
Pair Corralation between Faysal Bank and National Bank
Assuming the 90 days trading horizon Faysal Bank is expected to generate 1.32 times less return on investment than National Bank. But when comparing it to its historical volatility, Faysal Bank is 1.13 times less risky than National Bank. It trades about 0.1 of its potential returns per unit of risk. National Bank of is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,545 in National Bank of on September 2, 2024 and sell it today you would earn a total of 3,549 from holding National Bank of or generate 100.11% 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. National Bank of
Performance |
| Timeline |
| Faysal Bank |
| National Bank |
Faysal Bank and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Faysal Bank and National Bank
The main advantage of trading using opposite Faysal Bank and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faysal Bank position performs unexpectedly, National 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 National Bank will offset losses from the drop in National 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 |
| National Bank vs. Masood Textile Mills | National Bank vs. Fauji Foods | National Bank vs. KSB Pumps | National 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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