Correlation Between National Bank and Bank Islami
Can any of the company-specific risk be diversified away by investing in both National Bank and Bank Islami 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 Bank and Bank Islami into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Bank of and Bank Islami Pakistan, you can compare the effects of market volatilities on National Bank and Bank Islami 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 Bank with a short position of Bank Islami. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Bank Islami.
Diversification Opportunities for National Bank and Bank Islami
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between National and Bank is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Bank Islami Pakistan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Islami Pakistan and National 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 National Bank of are associated (or correlated) with Bank Islami. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Islami Pakistan has no effect on the direction of National Bank i.e., National Bank and Bank Islami go up and down completely randomly.
Pair Corralation between National Bank and Bank Islami
Assuming the 90 days trading horizon National Bank of is expected to generate 1.15 times more return on investment than Bank Islami. However, National Bank is 1.15 times more volatile than Bank Islami Pakistan. It trades about 0.12 of its potential returns per unit of risk. Bank Islami Pakistan is currently generating about 0.09 per unit of risk. If you would invest 6,464 in National Bank of on August 31, 2024 and sell it today you would earn a total of 506.00 from holding National Bank of or generate 7.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
National Bank of vs. Bank Islami Pakistan
Performance |
| Timeline |
| National Bank |
| Bank Islami Pakistan |
National Bank and Bank Islami Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and Bank Islami
The main advantage of trading using opposite National Bank and Bank Islami positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, Bank Islami 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 Islami will offset losses from the drop in Bank Islami's long position.| National Bank vs. Ittehad Chemicals | National Bank vs. Hi Tech Lubricants | National Bank vs. Pak Gulf Leasing | National Bank vs. Grays Leasing |
| Bank Islami vs. Crescent Steel Allied | Bank Islami vs. Agha Steel Industries | Bank Islami vs. Crescent Star Insurance | Bank Islami vs. ITTEFAQ Iron Industries |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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