Correlation Between International Steels and Bank of Punjab
Can any of the company-specific risk be diversified away by investing in both International Steels and Bank of Punjab 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 International Steels and Bank of Punjab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Steels and Bank of Punjab, you can compare the effects of market volatilities on International Steels and Bank of Punjab 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 International Steels with a short position of Bank of Punjab. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Steels and Bank of Punjab.
Diversification Opportunities for International Steels and Bank of Punjab
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between International and Bank is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding International Steels and Bank of Punjab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Punjab and International Steels 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 International Steels are associated (or correlated) with Bank of Punjab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Punjab has no effect on the direction of International Steels i.e., International Steels and Bank of Punjab go up and down completely randomly.
Pair Corralation between International Steels and Bank of Punjab
Assuming the 90 days trading horizon International Steels is expected to under-perform the Bank of Punjab. But the stock apears to be less risky and, when comparing its historical volatility, International Steels is 1.08 times less risky than Bank of Punjab. The stock trades about -0.5 of its potential returns per unit of risk. The Bank of Punjab is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest 1,093 in Bank of Punjab on November 4, 2024 and sell it today you would lose (82.00) from holding Bank of Punjab or give up 7.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Steels vs. Bank of Punjab
Performance |
| Timeline |
| International Steels |
| Bank of Punjab |
International Steels and Bank of Punjab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Steels and Bank of Punjab
The main advantage of trading using opposite International Steels and Bank of Punjab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Steels position performs unexpectedly, Bank of Punjab 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 Bank of Punjab will offset losses from the drop in Bank of Punjab's long position.| International Steels vs. Allied Bank | International Steels vs. MCB Bank | International Steels vs. Dost Steels | International Steels vs. Crescent Star Insurance |
| Bank of Punjab vs. Ghani Chemical Industries | Bank of Punjab vs. East West Insurance | Bank of Punjab vs. Shaheen Insurance | Bank of Punjab vs. First Fidelity Leasing |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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