Correlation Between Pakistan Hotel and Faysal Bank
Can any of the company-specific risk be diversified away by investing in both Pakistan Hotel 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 Hotel 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 Hotel Developers and Faysal Bank, you can compare the effects of market volatilities on Pakistan Hotel 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 Hotel with a short position of Faysal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Hotel and Faysal Bank.
Diversification Opportunities for Pakistan Hotel and Faysal Bank
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Pakistan and Faysal is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Hotel Developers and Faysal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faysal Bank and Pakistan Hotel 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 Hotel Developers 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 Hotel i.e., Pakistan Hotel and Faysal Bank go up and down completely randomly.
Pair Corralation between Pakistan Hotel and Faysal Bank
Assuming the 90 days trading horizon Pakistan Hotel Developers is expected to generate 1.42 times more return on investment than Faysal Bank. However, Pakistan Hotel is 1.42 times more volatile than Faysal Bank. It trades about 0.56 of its potential returns per unit of risk. Faysal Bank is currently generating about 0.06 per unit of risk. If you would invest 3,502 in Pakistan Hotel Developers on September 14, 2024 and sell it today you would earn a total of 2,527 from holding Pakistan Hotel Developers or generate 72.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Hotel Developers vs. Faysal Bank
Performance |
| Timeline |
| Pakistan Hotel Developers |
| Faysal Bank |
Pakistan Hotel and Faysal Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Hotel and Faysal Bank
The main advantage of trading using opposite Pakistan Hotel and Faysal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Hotel 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 Hotel vs. Habib Insurance | Pakistan Hotel vs. Ghandhara Automobile | Pakistan Hotel vs. Century Insurance | Pakistan Hotel vs. Reliance Weaving Mills |
| Faysal Bank vs. Engro Polymer Chemicals | Faysal Bank vs. Unilever Pakistan Foods | Faysal Bank vs. NetSol Technologies | Faysal Bank vs. Agritech |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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