Correlation Between Soneri Bank and Bank Alfalah
Can any of the company-specific risk be diversified away by investing in both Soneri Bank and Bank Alfalah 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 Soneri Bank and Bank Alfalah into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Soneri Bank and Bank Alfalah, you can compare the effects of market volatilities on Soneri Bank and Bank Alfalah 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 Soneri Bank with a short position of Bank Alfalah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Soneri Bank and Bank Alfalah.
Diversification Opportunities for Soneri Bank and Bank Alfalah
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Soneri and Bank is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Soneri Bank and Bank Alfalah in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Alfalah and Soneri Bank 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 Soneri Bank are associated (or correlated) with Bank Alfalah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Alfalah has no effect on the direction of Soneri Bank i.e., Soneri Bank and Bank Alfalah go up and down completely randomly.
Pair Corralation between Soneri Bank and Bank Alfalah
Assuming the 90 days trading horizon Soneri Bank is expected to generate 1.2 times less return on investment than Bank Alfalah. In addition to that, Soneri Bank is 1.06 times more volatile than Bank Alfalah. It trades about 0.11 of its total potential returns per unit of risk. Bank Alfalah is currently generating about 0.15 per unit of volatility. If you would invest 2,181 in Bank Alfalah on October 25, 2024 and sell it today you would earn a total of 6,219 from holding Bank Alfalah or generate 285.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.17% |
| Values | Daily Returns |
Soneri Bank vs. Bank Alfalah
Performance |
| Timeline |
| Soneri Bank |
| Bank Alfalah |
Soneri Bank and Bank Alfalah Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Soneri Bank and Bank Alfalah
The main advantage of trading using opposite Soneri Bank and Bank Alfalah positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Soneri Bank position performs unexpectedly, Bank Alfalah 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 Alfalah will offset losses from the drop in Bank Alfalah's long position.| Soneri Bank vs. Synthetic Products Enterprises | Soneri Bank vs. IBL HealthCare | Soneri Bank vs. Big Bird Foods | Soneri Bank vs. Pakistan Telecommunication |
| Bank Alfalah vs. Habib Insurance | Bank Alfalah vs. Beco Steel | Bank Alfalah vs. ORIX Leasing Pakistan | Bank Alfalah vs. Mughal Iron Steel |
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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