Correlation Between Faysal Bank and Pakistan Aluminium
Can any of the company-specific risk be diversified away by investing in both Faysal Bank and Pakistan Aluminium 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 Pakistan Aluminium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Faysal Bank and Pakistan Aluminium Beverage, you can compare the effects of market volatilities on Faysal Bank and Pakistan Aluminium 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 Pakistan Aluminium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faysal Bank and Pakistan Aluminium.
Diversification Opportunities for Faysal Bank and Pakistan Aluminium
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Faysal and Pakistan is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Faysal Bank and Pakistan Aluminium Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Aluminium 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 Pakistan Aluminium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Aluminium has no effect on the direction of Faysal Bank i.e., Faysal Bank and Pakistan Aluminium go up and down completely randomly.
Pair Corralation between Faysal Bank and Pakistan Aluminium
Assuming the 90 days trading horizon Faysal Bank is expected to generate 0.99 times more return on investment than Pakistan Aluminium. However, Faysal Bank is 1.02 times less risky than Pakistan Aluminium. It trades about 0.1 of its potential returns per unit of risk. Pakistan Aluminium Beverage is currently generating about 0.1 per unit of risk. If you would invest 2,785 in Faysal Bank on September 12, 2024 and sell it today you would earn a total of 2,059 from holding Faysal Bank or generate 73.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Faysal Bank vs. Pakistan Aluminium Beverage
Performance |
| Timeline |
| Faysal Bank |
| Pakistan Aluminium |
Faysal Bank and Pakistan Aluminium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Faysal Bank and Pakistan Aluminium
The main advantage of trading using opposite Faysal Bank and Pakistan Aluminium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faysal Bank position performs unexpectedly, Pakistan Aluminium 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 Pakistan Aluminium will offset losses from the drop in Pakistan Aluminium's long position.| Faysal Bank vs. Masood Textile Mills | Faysal Bank vs. Fauji Foods | Faysal Bank vs. KSB Pumps | Faysal Bank vs. Mari Petroleum |
| Pakistan Aluminium vs. Habib Insurance | Pakistan Aluminium vs. Ghandhara Automobile | Pakistan Aluminium vs. Century Insurance | Pakistan Aluminium vs. Reliance Weaving Mills |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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