Correlation Between Habib Bank and Pakistan State
Can any of the company-specific risk be diversified away by investing in both Habib Bank and Pakistan State 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 Pakistan State into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Habib Bank and Pakistan State Oil, you can compare the effects of market volatilities on Habib Bank and Pakistan State 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 Pakistan State. Check out your portfolio center. Please also check ongoing floating volatility patterns of Habib Bank and Pakistan State.
Diversification Opportunities for Habib Bank and Pakistan State
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Habib and Pakistan is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Habib Bank and Pakistan State Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan State Oil 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 Pakistan State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan State Oil has no effect on the direction of Habib Bank i.e., Habib Bank and Pakistan State go up and down completely randomly.
Pair Corralation between Habib Bank and Pakistan State
Assuming the 90 days trading horizon Habib Bank is expected to under-perform the Pakistan State. But the stock apears to be less risky and, when comparing its historical volatility, Habib Bank is 1.91 times less risky than Pakistan State. The stock trades about -0.48 of its potential returns per unit of risk. The Pakistan State Oil is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest 37,043 in Pakistan State Oil on November 28, 2024 and sell it today you would lose (3,127) from holding Pakistan State Oil or give up 8.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Habib Bank vs. Pakistan State Oil
Performance |
| Timeline |
| Habib Bank |
| Pakistan State Oil |
Habib Bank and Pakistan State Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Habib Bank and Pakistan State
The main advantage of trading using opposite Habib Bank and Pakistan State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Habib Bank position performs unexpectedly, Pakistan State 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 State will offset losses from the drop in Pakistan State's long position.| Habib Bank vs. Metropolitan Steel Corp | Habib Bank vs. Unity Foods | Habib Bank vs. Ghandhara Automobile | Habib Bank vs. Engro Polymer Chemicals |
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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