Correlation Between National Foods and Soneri Bank
Can any of the company-specific risk be diversified away by investing in both National Foods and Soneri Bank 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 National Foods and Soneri Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Foods and Soneri Bank, you can compare the effects of market volatilities on National Foods and Soneri Bank 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 National Foods with a short position of Soneri Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Foods and Soneri Bank.
Diversification Opportunities for National Foods and Soneri Bank
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between National and Soneri is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding National Foods and Soneri Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soneri Bank and National 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 National Foods are associated (or correlated) with Soneri Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soneri Bank has no effect on the direction of National Foods i.e., National Foods and Soneri Bank go up and down completely randomly.
Pair Corralation between National Foods and Soneri Bank
Assuming the 90 days trading horizon National Foods is expected to generate 2.12 times less return on investment than Soneri Bank. In addition to that, National Foods is 1.05 times more volatile than Soneri Bank. It trades about 0.19 of its total potential returns per unit of risk. Soneri Bank is currently generating about 0.43 per unit of volatility. If you would invest 1,402 in Soneri Bank on September 5, 2024 and sell it today you would earn a total of 234.00 from holding Soneri Bank or generate 16.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Foods vs. Soneri Bank
Performance |
| Timeline |
| National Foods |
| Soneri Bank |
National Foods and Soneri Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Foods and Soneri Bank
The main advantage of trading using opposite National Foods and Soneri Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Foods position performs unexpectedly, Soneri Bank 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 Soneri Bank will offset losses from the drop in Soneri Bank's long position.| National Foods vs. Habib Bank | National Foods vs. National Bank of | National Foods vs. United Bank | National Foods vs. MCB Bank |
| Soneri Bank vs. Air Link Communication | Soneri Bank vs. Pakistan Telecommunication | Soneri Bank vs. The Organic Meat | Soneri Bank vs. National Foods |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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