Correlation Between Habib Bank and Colgate Palmolive
Can any of the company-specific risk be diversified away by investing in both Habib Bank and Colgate Palmolive 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 Habib Bank and Colgate Palmolive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Habib Bank and Colgate Palmolive Pakistan, you can compare the effects of market volatilities on Habib Bank and Colgate Palmolive 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 Habib Bank with a short position of Colgate Palmolive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Habib Bank and Colgate Palmolive.
Diversification Opportunities for Habib Bank and Colgate Palmolive
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Habib and Colgate is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Habib Bank and Colgate Palmolive Pakistan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and Habib 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 Habib Bank are associated (or correlated) with Colgate Palmolive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colgate Palmolive has no effect on the direction of Habib Bank i.e., Habib Bank and Colgate Palmolive go up and down completely randomly.
Pair Corralation between Habib Bank and Colgate Palmolive
Assuming the 90 days trading horizon Habib Bank is expected to generate 1.43 times more return on investment than Colgate Palmolive. However, Habib Bank is 1.43 times more volatile than Colgate Palmolive Pakistan. It trades about 0.28 of its potential returns per unit of risk. Colgate Palmolive Pakistan is currently generating about 0.2 per unit of risk. If you would invest 11,579 in Habib Bank on September 2, 2024 and sell it today you would earn a total of 6,521 from holding Habib Bank or generate 56.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Habib Bank vs. Colgate Palmolive Pakistan
Performance |
| Timeline |
| Habib Bank |
| Colgate Palmolive |
Habib Bank and Colgate Palmolive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Habib Bank and Colgate Palmolive
The main advantage of trading using opposite Habib Bank and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Habib Bank position performs unexpectedly, Colgate Palmolive 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 Colgate Palmolive will offset losses from the drop in Colgate Palmolive's long position.| Habib Bank vs. Soneri Bank | Habib Bank vs. Askari Bank | Habib Bank vs. Bank of Punjab | Habib Bank vs. Habib Insurance |
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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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