Correlation Between Habib Bank and Soneri Bank
Can any of the company-specific risk be diversified away by investing in both Habib Bank and Soneri 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 Soneri 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 Soneri Bank, you can compare the effects of market volatilities on Habib Bank and Soneri 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 Soneri Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Habib Bank and Soneri Bank.
Diversification Opportunities for Habib Bank and Soneri Bank
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Habib and Soneri is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Habib Bank and Soneri Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soneri 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 Soneri Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soneri Bank has no effect on the direction of Habib Bank i.e., Habib Bank and Soneri Bank go up and down completely randomly.
Pair Corralation between Habib Bank and Soneri Bank
Assuming the 90 days trading horizon Habib Bank is expected to generate 0.94 times more return on investment than Soneri Bank. However, Habib Bank is 1.06 times less risky than Soneri Bank. It trades about 0.11 of its potential returns per unit of risk. Soneri Bank is currently generating about 0.1 per unit of risk. If you would invest 5,434 in Habib Bank on August 28, 2024 and sell it today you would earn a total of 9,284 from holding Habib Bank or generate 170.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.14% |
| Values | Daily Returns |
Habib Bank vs. Soneri Bank
Performance |
| Timeline |
| Habib Bank |
| Soneri Bank |
Habib Bank and Soneri Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Habib Bank and Soneri Bank
The main advantage of trading using opposite Habib Bank and Soneri Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Habib Bank position performs unexpectedly, Soneri 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 Soneri Bank will offset losses from the drop in Soneri Bank's long position.| Habib Bank vs. Agritech | Habib Bank vs. Unilever Pakistan Foods | Habib Bank vs. Aisha Steel Mills | Habib Bank vs. Air Link Communication |
| Soneri Bank vs. Masood Textile Mills | Soneri Bank vs. Fauji Foods | Soneri Bank vs. KSB Pumps | Soneri 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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