Correlation Between United Bank and Grays Leasing
Can any of the company-specific risk be diversified away by investing in both United Bank and Grays Leasing 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 United Bank and Grays Leasing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Bank and Grays Leasing, you can compare the effects of market volatilities on United Bank and Grays Leasing 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 United Bank with a short position of Grays Leasing. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Bank and Grays Leasing.
Diversification Opportunities for United Bank and Grays Leasing
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Grays is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding United Bank and Grays Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grays Leasing and United 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 United Bank are associated (or correlated) with Grays Leasing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grays Leasing has no effect on the direction of United Bank i.e., United Bank and Grays Leasing go up and down completely randomly.
Pair Corralation between United Bank and Grays Leasing
Assuming the 90 days trading horizon United Bank is expected to generate 1.05 times less return on investment than Grays Leasing. But when comparing it to its historical volatility, United Bank is 3.76 times less risky than Grays Leasing. It trades about 0.22 of its potential returns per unit of risk. Grays Leasing is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 308.00 in Grays Leasing on November 2, 2024 and sell it today you would earn a total of 201.00 from holding Grays Leasing or generate 65.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 51.55% |
| Values | Daily Returns |
United Bank vs. Grays Leasing
Performance |
| Timeline |
| United Bank |
| Grays Leasing |
United Bank and Grays Leasing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Bank and Grays Leasing
The main advantage of trading using opposite United Bank and Grays Leasing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Bank position performs unexpectedly, Grays Leasing 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 Grays Leasing will offset losses from the drop in Grays Leasing's long position.| United Bank vs. Fauji Foods | United Bank vs. Mughal Iron Steel | United Bank vs. Synthetic Products Enterprises | United Bank vs. ITTEFAQ Iron Industries |
| Grays Leasing vs. Masood Textile Mills | Grays Leasing vs. Fauji Foods | Grays Leasing vs. KSB Pumps | Grays Leasing 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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