Correlation Between Pakistan Synthetics and Habib Metropolitan
Can any of the company-specific risk be diversified away by investing in both Pakistan Synthetics and Habib Metropolitan 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 Synthetics and Habib Metropolitan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Synthetics and Habib Metropolitan Bank, you can compare the effects of market volatilities on Pakistan Synthetics and Habib Metropolitan 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 Synthetics with a short position of Habib Metropolitan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Synthetics and Habib Metropolitan.
Diversification Opportunities for Pakistan Synthetics and Habib Metropolitan
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pakistan and Habib is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Synthetics and Habib Metropolitan Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Metropolitan Bank and Pakistan Synthetics 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 Synthetics are associated (or correlated) with Habib Metropolitan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Metropolitan Bank has no effect on the direction of Pakistan Synthetics i.e., Pakistan Synthetics and Habib Metropolitan go up and down completely randomly.
Pair Corralation between Pakistan Synthetics and Habib Metropolitan
Assuming the 90 days trading horizon Pakistan Synthetics is expected to generate 1.35 times less return on investment than Habib Metropolitan. In addition to that, Pakistan Synthetics is 1.31 times more volatile than Habib Metropolitan Bank. It trades about 0.21 of its total potential returns per unit of risk. Habib Metropolitan Bank is currently generating about 0.38 per unit of volatility. If you would invest 7,073 in Habib Metropolitan Bank on August 29, 2024 and sell it today you would earn a total of 1,449 from holding Habib Metropolitan Bank or generate 20.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Synthetics vs. Habib Metropolitan Bank
Performance |
| Timeline |
| Pakistan Synthetics |
| Habib Metropolitan Bank |
Pakistan Synthetics and Habib Metropolitan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Synthetics and Habib Metropolitan
The main advantage of trading using opposite Pakistan Synthetics and Habib Metropolitan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Synthetics position performs unexpectedly, Habib Metropolitan 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 Habib Metropolitan will offset losses from the drop in Habib Metropolitan's long position.| Pakistan Synthetics vs. Masood Textile Mills | Pakistan Synthetics vs. Fauji Foods | Pakistan Synthetics vs. KSB Pumps | Pakistan Synthetics vs. Mari Petroleum |
| Habib Metropolitan vs. Masood Textile Mills | Habib Metropolitan vs. Fauji Foods | Habib Metropolitan vs. KSB Pumps | Habib Metropolitan 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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