Correlation Between Pakistan International and Faysal Bank
Can any of the company-specific risk be diversified away by investing in both Pakistan International 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 International 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 International Bulk and Faysal Bank, you can compare the effects of market volatilities on Pakistan International 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 International with a short position of Faysal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan International and Faysal Bank.
Diversification Opportunities for Pakistan International and Faysal Bank
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Pakistan and Faysal is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan International Bulk and Faysal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faysal Bank and Pakistan International 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 International Bulk 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 International i.e., Pakistan International and Faysal Bank go up and down completely randomly.
Pair Corralation between Pakistan International and Faysal Bank
Assuming the 90 days trading horizon Pakistan International Bulk is expected to generate 1.33 times more return on investment than Faysal Bank. However, Pakistan International is 1.33 times more volatile than Faysal Bank. It trades about 0.18 of its potential returns per unit of risk. Faysal Bank is currently generating about 0.06 per unit of risk. If you would invest 783.00 in Pakistan International Bulk on September 14, 2024 and sell it today you would earn a total of 124.00 from holding Pakistan International Bulk or generate 15.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan International Bulk vs. Faysal Bank
Performance |
| Timeline |
| Pakistan International |
| Faysal Bank |
Pakistan International and Faysal Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan International and Faysal Bank
The main advantage of trading using opposite Pakistan International and Faysal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan International 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 International vs. The Organic Meat | Pakistan International vs. National Foods | Pakistan International vs. Air Link Communication | Pakistan International vs. Big Bird Foods |
| 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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