Correlation Between Habib Metropolitan and Pakistan Hotel
Can any of the company-specific risk be diversified away by investing in both Habib Metropolitan and Pakistan Hotel 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 Metropolitan and Pakistan Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Habib Metropolitan Bank and Pakistan Hotel Developers, you can compare the effects of market volatilities on Habib Metropolitan and Pakistan Hotel 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 Metropolitan with a short position of Pakistan Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Habib Metropolitan and Pakistan Hotel.
Diversification Opportunities for Habib Metropolitan and Pakistan Hotel
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Habib and Pakistan is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Habib Metropolitan Bank and Pakistan Hotel Developers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Hotel Developers and Habib Metropolitan 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 Metropolitan Bank are associated (or correlated) with Pakistan Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Hotel Developers has no effect on the direction of Habib Metropolitan i.e., Habib Metropolitan and Pakistan Hotel go up and down completely randomly.
Pair Corralation between Habib Metropolitan and Pakistan Hotel
Assuming the 90 days trading horizon Habib Metropolitan Bank is expected to generate 1.33 times more return on investment than Pakistan Hotel. However, Habib Metropolitan is 1.33 times more volatile than Pakistan Hotel Developers. It trades about 0.3 of its potential returns per unit of risk. Pakistan Hotel Developers is currently generating about -0.29 per unit of risk. If you would invest 8,208 in Habib Metropolitan Bank on October 21, 2024 and sell it today you would earn a total of 1,703 from holding Habib Metropolitan Bank or generate 20.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Habib Metropolitan Bank vs. Pakistan Hotel Developers
Performance |
| Timeline |
| Habib Metropolitan Bank |
| Pakistan Hotel Developers |
Habib Metropolitan and Pakistan Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Habib Metropolitan and Pakistan Hotel
The main advantage of trading using opposite Habib Metropolitan and Pakistan Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Habib Metropolitan position performs unexpectedly, Pakistan Hotel 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 Hotel will offset losses from the drop in Pakistan Hotel's long position.| Habib Metropolitan vs. Premier Insurance | Habib Metropolitan vs. Air Link Communication | Habib Metropolitan vs. Pakistan Telecommunication | Habib Metropolitan vs. Universal Insurance |
| Pakistan Hotel vs. Lotte Chemical Pakistan | Pakistan Hotel vs. Fateh Sports Wear | Pakistan Hotel vs. Data Agro | Pakistan Hotel vs. Pakistan Telecommunication |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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