Correlation Between Meezan Bank and Pakistan Aluminium
Can any of the company-specific risk be diversified away by investing in both Meezan Bank and Pakistan Aluminium 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 Pakistan Aluminium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meezan Bank and Pakistan Aluminium Beverage, you can compare the effects of market volatilities on Meezan Bank and Pakistan Aluminium 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 Pakistan Aluminium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meezan Bank and Pakistan Aluminium.
Diversification Opportunities for Meezan Bank and Pakistan Aluminium
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Meezan and Pakistan is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Meezan Bank and Pakistan Aluminium Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Aluminium 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 Pakistan Aluminium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Aluminium has no effect on the direction of Meezan Bank i.e., Meezan Bank and Pakistan Aluminium go up and down completely randomly.
Pair Corralation between Meezan Bank and Pakistan Aluminium
Assuming the 90 days trading horizon Meezan Bank is expected to generate 0.74 times more return on investment than Pakistan Aluminium. However, Meezan Bank is 1.36 times less risky than Pakistan Aluminium. It trades about 0.17 of its potential returns per unit of risk. Pakistan Aluminium Beverage is currently generating about 0.08 per unit of risk. If you would invest 7,438 in Meezan Bank on August 28, 2024 and sell it today you would earn a total of 18,896 from holding Meezan Bank or generate 254.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meezan Bank vs. Pakistan Aluminium Beverage
Performance |
| Timeline |
| Meezan Bank |
| Pakistan Aluminium |
Meezan Bank and Pakistan Aluminium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meezan Bank and Pakistan Aluminium
The main advantage of trading using opposite Meezan Bank and Pakistan Aluminium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meezan Bank position performs unexpectedly, Pakistan Aluminium 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 Aluminium will offset losses from the drop in Pakistan Aluminium'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 |
| Pakistan Aluminium vs. Habib Insurance | Pakistan Aluminium vs. Century Insurance | Pakistan Aluminium vs. Reliance Weaving Mills | Pakistan Aluminium vs. Media Times |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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