Correlation Between KSB Pumps and Bank of Punjab
Can any of the company-specific risk be diversified away by investing in both KSB Pumps 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 KSB Pumps 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 KSB Pumps and Bank of Punjab, you can compare the effects of market volatilities on KSB Pumps 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 KSB Pumps with a short position of Bank of Punjab. Check out your portfolio center. Please also check ongoing floating volatility patterns of KSB Pumps and Bank of Punjab.
Diversification Opportunities for KSB Pumps and Bank of Punjab
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between KSB and Bank is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding KSB Pumps 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 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 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 KSB Pumps i.e., KSB Pumps and Bank of Punjab go up and down completely randomly.
Pair Corralation between KSB Pumps and Bank of Punjab
Assuming the 90 days trading horizon KSB Pumps is expected to generate 5.08 times less return on investment than Bank of Punjab. But when comparing it to its historical volatility, KSB Pumps is 1.93 times less risky than Bank of Punjab. It trades about 0.11 of its potential returns per unit of risk. Bank of Punjab is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 987.00 in Bank of Punjab on November 28, 2024 and sell it today you would earn a total of 272.00 from holding Bank of Punjab or generate 27.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KSB Pumps vs. Bank of Punjab
Performance |
| Timeline |
| KSB Pumps |
| Bank of Punjab |
KSB Pumps and Bank of Punjab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KSB Pumps and Bank of Punjab
The main advantage of trading using opposite KSB Pumps and Bank of Punjab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KSB Pumps 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.| KSB Pumps vs. Soneri Bank | KSB Pumps vs. Pakistan Reinsurance | KSB Pumps vs. ORIX Leasing Pakistan | KSB Pumps vs. Sindh Modaraba Management |
| Bank of Punjab vs. Matco Foods | Bank of Punjab vs. Grays Leasing | Bank of Punjab vs. National Foods | Bank of Punjab vs. Orient Rental Modaraba |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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