Correlation Between Habib Bank and United Bank
Can any of the company-specific risk be diversified away by investing in both Habib Bank and United 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 United 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 United Bank, you can compare the effects of market volatilities on Habib Bank and United 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 United Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Habib Bank and United Bank.
Diversification Opportunities for Habib Bank and United Bank
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Habib and United is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Habib Bank and United Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United 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 United Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Bank has no effect on the direction of Habib Bank i.e., Habib Bank and United Bank go up and down completely randomly.
Pair Corralation between Habib Bank and United Bank
Assuming the 90 days trading horizon Habib Bank is expected to generate 1.64 times less return on investment than United Bank. In addition to that, Habib Bank is 1.56 times more volatile than United Bank. It trades about 0.13 of its total potential returns per unit of risk. United Bank is currently generating about 0.34 per unit of volatility. If you would invest 29,438 in United Bank on August 24, 2024 and sell it today you would earn a total of 3,938 from holding United Bank or generate 13.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Habib Bank vs. United Bank
Performance |
| Timeline |
| Habib Bank |
| United Bank |
Habib Bank and United Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Habib Bank and United Bank
The main advantage of trading using opposite Habib Bank and United Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Habib Bank position performs unexpectedly, United 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 United Bank will offset losses from the drop in United Bank's long position.| Habib Bank vs. JS Investments | Habib Bank vs. Unity Foods | Habib Bank vs. Unilever Pakistan Foods | Habib Bank vs. Big Bird Foods |
| United Bank vs. Habib Bank | United Bank vs. National Bank of | United Bank vs. MCB Bank | United Bank vs. Allied Bank |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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