Correlation Between Pakistan Aluminium and Faysal Bank
Can any of the company-specific risk be diversified away by investing in both Pakistan Aluminium 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 Pakistan Aluminium and Faysal Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Aluminium Beverage and Faysal Bank, you can compare the effects of market volatilities on Pakistan Aluminium 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 Pakistan Aluminium with a short position of Faysal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Aluminium and Faysal Bank.
Diversification Opportunities for Pakistan Aluminium and Faysal Bank
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Pakistan and Faysal is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Aluminium Beverage and Faysal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faysal Bank and Pakistan Aluminium 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 Pakistan Aluminium Beverage 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 Pakistan Aluminium i.e., Pakistan Aluminium and Faysal Bank go up and down completely randomly.
Pair Corralation between Pakistan Aluminium and Faysal Bank
Assuming the 90 days trading horizon Pakistan Aluminium is expected to generate 1.03 times less return on investment than Faysal Bank. In addition to that, Pakistan Aluminium is 1.02 times more volatile than Faysal Bank. It trades about 0.1 of its total potential returns per unit of risk. Faysal Bank is currently generating about 0.1 per unit of volatility. If you would invest 2,785 in Faysal Bank on September 12, 2024 and sell it today you would earn a total of 2,059 from holding Faysal Bank or generate 73.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Aluminium Beverage vs. Faysal Bank
Performance |
| Timeline |
| Pakistan Aluminium |
| Faysal Bank |
Pakistan Aluminium and Faysal Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Aluminium and Faysal Bank
The main advantage of trading using opposite Pakistan Aluminium and Faysal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Aluminium 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.| Pakistan Aluminium vs. Habib Insurance | Pakistan Aluminium vs. Ghandhara Automobile | Pakistan Aluminium vs. Century Insurance | Pakistan Aluminium vs. Reliance Weaving Mills |
| 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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