Correlation Between Meezan Bank and Habib Metropolitan
Can any of the company-specific risk be diversified away by investing in both Meezan Bank and Habib Metropolitan 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 Meezan Bank and Habib Metropolitan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meezan Bank and Habib Metropolitan Bank, you can compare the effects of market volatilities on Meezan Bank and Habib Metropolitan 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 Meezan Bank with a short position of Habib Metropolitan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meezan Bank and Habib Metropolitan.
Diversification Opportunities for Meezan Bank and Habib Metropolitan
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Meezan and Habib is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Meezan Bank and Habib Metropolitan Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Metropolitan Bank and Meezan 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 Meezan Bank are associated (or correlated) with Habib Metropolitan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Metropolitan Bank has no effect on the direction of Meezan Bank i.e., Meezan Bank and Habib Metropolitan go up and down completely randomly.
Pair Corralation between Meezan Bank and Habib Metropolitan
Assuming the 90 days trading horizon Meezan Bank is expected to generate 1.11 times less return on investment than Habib Metropolitan. But when comparing it to its historical volatility, Meezan Bank is 1.02 times less risky than Habib Metropolitan. It trades about 0.21 of its potential returns per unit of risk. Habib Metropolitan Bank is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 2,118 in Habib Metropolitan Bank on August 28, 2024 and sell it today you would earn a total of 5,862 from holding Habib Metropolitan Bank or generate 276.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meezan Bank vs. Habib Metropolitan Bank
Performance |
| Timeline |
| Meezan Bank |
| Habib Metropolitan Bank |
Meezan Bank and Habib Metropolitan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meezan Bank and Habib Metropolitan
The main advantage of trading using opposite Meezan Bank and Habib Metropolitan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meezan Bank position performs unexpectedly, Habib Metropolitan 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 Habib Metropolitan will offset losses from the drop in Habib Metropolitan's long position.| Meezan Bank vs. Pakistan Aluminium Beverage | Meezan Bank vs. TPL Insurance | Meezan Bank vs. Roshan Packages | Meezan Bank vs. Reliance Insurance Co |
| Habib Metropolitan vs. Masood Textile Mills | Habib Metropolitan vs. Fauji Foods | Habib Metropolitan vs. KSB Pumps | Habib Metropolitan vs. Mari Petroleum |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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