Correlation Between Sardar Chemical and Bank of Punjab
Can any of the company-specific risk be diversified away by investing in both Sardar Chemical and Bank of Punjab 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 Sardar Chemical and Bank of Punjab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sardar Chemical Industries and Bank of Punjab, you can compare the effects of market volatilities on Sardar Chemical and Bank of Punjab 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 Sardar Chemical with a short position of Bank of Punjab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sardar Chemical and Bank of Punjab.
Diversification Opportunities for Sardar Chemical and Bank of Punjab
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sardar and Bank is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Sardar Chemical Industries and Bank of Punjab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Punjab and Sardar Chemical 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 Sardar Chemical Industries are associated (or correlated) with Bank of Punjab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Punjab has no effect on the direction of Sardar Chemical i.e., Sardar Chemical and Bank of Punjab go up and down completely randomly.
Pair Corralation between Sardar Chemical and Bank of Punjab
Assuming the 90 days trading horizon Sardar Chemical is expected to generate 2.79 times less return on investment than Bank of Punjab. In addition to that, Sardar Chemical is 1.16 times more volatile than Bank of Punjab. It trades about 0.05 of its total potential returns per unit of risk. Bank of Punjab is currently generating about 0.17 per unit of volatility. If you would invest 502.00 in Bank of Punjab on October 13, 2024 and sell it today you would earn a total of 507.00 from holding Bank of Punjab or generate 101.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 63.12% |
| Values | Daily Returns |
Sardar Chemical Industries vs. Bank of Punjab
Performance |
| Timeline |
| Sardar Chemical Indu |
| Bank of Punjab |
Sardar Chemical and Bank of Punjab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sardar Chemical and Bank of Punjab
The main advantage of trading using opposite Sardar Chemical and Bank of Punjab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sardar Chemical position performs unexpectedly, Bank of Punjab 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 Bank of Punjab will offset losses from the drop in Bank of Punjab's long position.| Sardar Chemical vs. Habib Insurance | Sardar Chemical vs. Ghandhara Automobile | Sardar Chemical vs. Shadab Textile Mills | Sardar Chemical vs. Century Insurance |
| Bank of Punjab vs. Aisha Steel Mills | Bank of Punjab vs. Lotte Chemical Pakistan | Bank of Punjab vs. Wah Nobel Chemicals | Bank of Punjab vs. Unity Foods |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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