Correlation Between National Bank and Faysal Bank
Can any of the company-specific risk be diversified away by investing in both National Bank and Faysal 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 Bank and Faysal Bank 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 Faysal Bank, you can compare the effects of market volatilities on National Bank and Faysal 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 Bank with a short position of Faysal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Faysal Bank.
Diversification Opportunities for National Bank and Faysal Bank
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Faysal is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Faysal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faysal Bank 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 Faysal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faysal Bank has no effect on the direction of National Bank i.e., National Bank and Faysal Bank go up and down completely randomly.
Pair Corralation between National Bank and Faysal Bank
Assuming the 90 days trading horizon National Bank of is expected to generate 1.13 times more return on investment than Faysal Bank. However, National Bank is 1.13 times more volatile than Faysal Bank. It trades about 0.16 of its potential returns per unit of risk. Faysal Bank is currently generating about 0.12 per unit of risk. If you would invest 2,835 in National Bank of on August 29, 2024 and sell it today you would earn a total of 3,757 from holding National Bank of or generate 132.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Bank of vs. Faysal Bank
Performance |
| Timeline |
| National Bank |
| Faysal Bank |
National Bank and Faysal Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and Faysal Bank
The main advantage of trading using opposite National Bank and Faysal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, Faysal 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 Faysal Bank will offset losses from the drop in Faysal Bank's long position.| National Bank vs. AKD Hospitality | National Bank vs. Air Link Communication | National Bank vs. Hi Tech Lubricants | National Bank vs. Pakistan Telecommunication |
| Faysal Bank vs. Masood Textile Mills | Faysal Bank vs. Fauji Foods | Faysal Bank vs. KSB Pumps | Faysal Bank 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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