Correlation Between Matco Foods and Bank Alfalah
Can any of the company-specific risk be diversified away by investing in both Matco Foods 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 Matco Foods and Bank Alfalah into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matco Foods and Bank Alfalah, you can compare the effects of market volatilities on Matco Foods 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 Matco Foods with a short position of Bank Alfalah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matco Foods and Bank Alfalah.
Diversification Opportunities for Matco Foods and Bank Alfalah
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Matco and Bank is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Matco Foods and Bank Alfalah in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Alfalah and Matco Foods 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 Matco Foods 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 Matco Foods i.e., Matco Foods and Bank Alfalah go up and down completely randomly.
Pair Corralation between Matco Foods and Bank Alfalah
Assuming the 90 days trading horizon Matco Foods is expected to generate 3.11 times more return on investment than Bank Alfalah. However, Matco Foods is 3.11 times more volatile than Bank Alfalah. It trades about 0.03 of its potential returns per unit of risk. Bank Alfalah is currently generating about -0.18 per unit of risk. If you would invest 4,850 in Matco Foods on November 3, 2024 and sell it today you would earn a total of 56.00 from holding Matco Foods or generate 1.15% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Matco Foods vs. Bank Alfalah
Performance |
Timeline |
Matco Foods |
Bank Alfalah |
Matco Foods and Bank Alfalah Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Matco Foods and Bank Alfalah
The main advantage of trading using opposite Matco Foods and Bank Alfalah positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matco Foods 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.Matco Foods vs. Engro Polymer Chemicals | Matco Foods vs. Pakistan Telecommunication | Matco Foods vs. Pakistan Aluminium Beverage | Matco Foods vs. Unilever Pakistan Foods |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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