Correlation Between KSB Pumps and Bank Alfalah
Can any of the company-specific risk be diversified away by investing in both KSB Pumps and Bank Alfalah 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 KSB Pumps and Bank Alfalah into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KSB Pumps and Bank Alfalah, you can compare the effects of market volatilities on KSB Pumps and Bank Alfalah 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 KSB Pumps with a short position of Bank Alfalah. Check out your portfolio center. Please also check ongoing floating volatility patterns of KSB Pumps and Bank Alfalah.
Diversification Opportunities for KSB Pumps and Bank Alfalah
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KSB and Bank is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding KSB Pumps and Bank Alfalah in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Alfalah and KSB Pumps 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 KSB Pumps are associated (or correlated) with Bank Alfalah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Alfalah has no effect on the direction of KSB Pumps i.e., KSB Pumps and Bank Alfalah go up and down completely randomly.
Pair Corralation between KSB Pumps and Bank Alfalah
Assuming the 90 days trading horizon KSB Pumps is expected to generate 1.13 times more return on investment than Bank Alfalah. However, KSB Pumps is 1.13 times more volatile than Bank Alfalah. It trades about 0.09 of its potential returns per unit of risk. Bank Alfalah is currently generating about 0.05 per unit of risk. If you would invest 14,922 in KSB Pumps on October 23, 2024 and sell it today you would earn a total of 540.00 from holding KSB Pumps or generate 3.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
KSB Pumps vs. Bank Alfalah
Performance |
| Timeline |
| KSB Pumps |
| Bank Alfalah |
KSB Pumps and Bank Alfalah Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KSB Pumps and Bank Alfalah
The main advantage of trading using opposite KSB Pumps and Bank Alfalah positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KSB Pumps position performs unexpectedly, Bank Alfalah 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 Alfalah will offset losses from the drop in Bank Alfalah's long position.| KSB Pumps vs. ORIX Leasing Pakistan | KSB Pumps vs. MCB Investment Manag | KSB Pumps vs. Agritech | KSB Pumps vs. Grays Leasing |
| Bank Alfalah vs. Adamjee Insurance | Bank Alfalah vs. Pakistan Reinsurance | Bank Alfalah vs. Matco Foods | Bank Alfalah vs. Ghandhara Automobile |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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