Correlation Between Shifa International and Bank of Punjab
Can any of the company-specific risk be diversified away by investing in both Shifa International 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 Shifa International 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 Shifa International Hospitals and Bank of Punjab, you can compare the effects of market volatilities on Shifa International 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 Shifa International with a short position of Bank of Punjab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shifa International and Bank of Punjab.
Diversification Opportunities for Shifa International and Bank of Punjab
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Shifa and Bank is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Shifa International Hospitals 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 Shifa 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 Shifa International Hospitals 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 Shifa International i.e., Shifa International and Bank of Punjab go up and down completely randomly.
Pair Corralation between Shifa International and Bank of Punjab
Assuming the 90 days trading horizon Shifa International Hospitals is expected to generate 0.88 times more return on investment than Bank of Punjab. However, Shifa International Hospitals is 1.14 times less risky than Bank of Punjab. It trades about 0.14 of its potential returns per unit of risk. Bank of Punjab is currently generating about 0.11 per unit of risk. If you would invest 11,874 in Shifa International Hospitals on August 31, 2024 and sell it today you would earn a total of 27,251 from holding Shifa International Hospitals or generate 229.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.59% |
| Values | Daily Returns |
Shifa International Hospitals vs. Bank of Punjab
Performance |
| Timeline |
| Shifa International |
| Bank of Punjab |
Shifa International and Bank of Punjab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shifa International and Bank of Punjab
The main advantage of trading using opposite Shifa International and Bank of Punjab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shifa International 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.| Shifa International vs. K Electric | Shifa International vs. Engro | Shifa International vs. Lucky Cement | Shifa International vs. Hub Power |
| Bank of Punjab vs. Oil and Gas | Bank of Punjab vs. Pakistan State Oil | Bank of Punjab vs. Pakistan Petroleum | Bank of Punjab vs. Fauji Fertilizer |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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