Correlation Between National Bank and Shell Pakistan
Can any of the company-specific risk be diversified away by investing in both National Bank and Shell Pakistan 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 Shell Pakistan 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 Shell Pakistan, you can compare the effects of market volatilities on National Bank and Shell Pakistan 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 Shell Pakistan. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Shell Pakistan.
Diversification Opportunities for National Bank and Shell Pakistan
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between National and Shell is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Shell Pakistan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell 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 Shell Pakistan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shell Pakistan has no effect on the direction of National Bank i.e., National Bank and Shell Pakistan go up and down completely randomly.
Pair Corralation between National Bank and Shell Pakistan
Assuming the 90 days trading horizon National Bank of is expected to generate 1.65 times more return on investment than Shell Pakistan. However, National Bank is 1.65 times more volatile than Shell Pakistan. It trades about 0.11 of its potential returns per unit of risk. Shell Pakistan is currently generating about 0.14 per unit of risk. If you would invest 6,043 in National Bank of on September 2, 2024 and sell it today you would earn a total of 1,051 from holding National Bank of or generate 17.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Bank of vs. Shell Pakistan
Performance |
| Timeline |
| National Bank |
| Shell Pakistan |
National Bank and Shell Pakistan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and Shell Pakistan
The main advantage of trading using opposite National Bank and Shell Pakistan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, Shell Pakistan 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 Shell Pakistan will offset losses from the drop in Shell Pakistan's long position.| National Bank vs. Masood Textile Mills | National Bank vs. Fauji Foods | National Bank vs. KSB Pumps | National Bank vs. Mari Petroleum |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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