Correlation Between Faysal Bank and Pak Datacom
Can any of the company-specific risk be diversified away by investing in both Faysal Bank and Pak Datacom 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 Pak Datacom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Faysal Bank and Pak Datacom, you can compare the effects of market volatilities on Faysal Bank and Pak Datacom 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 Pak Datacom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faysal Bank and Pak Datacom.
Diversification Opportunities for Faysal Bank and Pak Datacom
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Faysal and Pak is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Faysal Bank and Pak Datacom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pak Datacom 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 Pak Datacom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pak Datacom has no effect on the direction of Faysal Bank i.e., Faysal Bank and Pak Datacom go up and down completely randomly.
Pair Corralation between Faysal Bank and Pak Datacom
Assuming the 90 days trading horizon Faysal Bank is expected to generate 0.79 times more return on investment than Pak Datacom. However, Faysal Bank is 1.26 times less risky than Pak Datacom. It trades about 0.1 of its potential returns per unit of risk. Pak Datacom is currently generating about 0.05 per unit of risk. If you would invest 2,011 in Faysal Bank on August 27, 2024 and sell it today you would earn a total of 3,202 from holding Faysal Bank or generate 159.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 93.61% |
| Values | Daily Returns |
Faysal Bank vs. Pak Datacom
Performance |
| Timeline |
| Faysal Bank |
| Pak Datacom |
Faysal Bank and Pak Datacom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Faysal Bank and Pak Datacom
The main advantage of trading using opposite Faysal Bank and Pak Datacom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faysal Bank position performs unexpectedly, Pak Datacom 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 Pak Datacom will offset losses from the drop in Pak Datacom's long position.| Faysal Bank vs. Jubilee Life Insurance | Faysal Bank vs. Pakistan Synthetics | Faysal Bank vs. Honda Atlas Cars | Faysal Bank vs. Atlas Insurance |
| Pak Datacom vs. Masood Textile Mills | Pak Datacom vs. Fauji Foods | Pak Datacom vs. KSB Pumps | Pak Datacom 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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