Correlation Between Habib Bank and Faysal Bank
Can any of the company-specific risk be diversified away by investing in both Habib Bank and Faysal 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 Habib Bank and Faysal Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Habib Bank and Faysal Bank, you can compare the effects of market volatilities on Habib Bank and Faysal 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 Habib Bank with a short position of Faysal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Habib Bank and Faysal Bank.
Diversification Opportunities for Habib Bank and Faysal Bank
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Habib and Faysal is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Habib Bank and Faysal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faysal Bank 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 Faysal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faysal Bank has no effect on the direction of Habib Bank i.e., Habib Bank and Faysal Bank go up and down completely randomly.
Pair Corralation between Habib Bank and Faysal Bank
Assuming the 90 days trading horizon Habib Bank is expected to generate 0.91 times more return on investment than Faysal Bank. However, Habib Bank is 1.1 times less risky than Faysal Bank. It trades about 0.17 of its potential returns per unit of risk. Faysal Bank is currently generating about -0.02 per unit of risk. If you would invest 13,986 in Habib Bank on August 29, 2024 and sell it today you would earn a total of 1,465 from holding Habib Bank or generate 10.47% 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. Faysal Bank
Performance |
| Timeline |
| Habib Bank |
| Faysal Bank |
Habib Bank and Faysal Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Habib Bank and Faysal Bank
The main advantage of trading using opposite Habib Bank and Faysal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Habib Bank position performs unexpectedly, Faysal 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 Faysal Bank will offset losses from the drop in Faysal Bank's long position.| Habib Bank vs. Masood Textile Mills | Habib Bank vs. Fauji Foods | Habib Bank vs. KSB Pumps | Habib Bank vs. Mari Petroleum |
| Faysal Bank vs. Masood Textile Mills | Faysal Bank vs. Fauji Foods | Faysal Bank vs. KSB Pumps | Faysal 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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