Correlation Between United Bank and Habib Bank
Can any of the company-specific risk be diversified away by investing in both United Bank and Habib Bank 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 Habib Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Bank and Habib Bank, you can compare the effects of market volatilities on United Bank and Habib Bank 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 Habib Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Bank and Habib Bank.
Diversification Opportunities for United Bank and Habib Bank
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and Habib is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding United Bank and Habib Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Bank 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 Habib Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Bank has no effect on the direction of United Bank i.e., United Bank and Habib Bank go up and down completely randomly.
Pair Corralation between United Bank and Habib Bank
Assuming the 90 days trading horizon United Bank is expected to generate 0.88 times more return on investment than Habib Bank. However, United Bank is 1.14 times less risky than Habib Bank. It trades about 0.24 of its potential returns per unit of risk. Habib Bank is currently generating about 0.12 per unit of risk. If you would invest 6,943 in United Bank on August 24, 2024 and sell it today you would earn a total of 26,634 from holding United Bank or generate 383.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Bank vs. Habib Bank
Performance |
| Timeline |
| United Bank |
| Habib Bank |
United Bank and Habib Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Bank and Habib Bank
The main advantage of trading using opposite United Bank and Habib Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Bank position performs unexpectedly, Habib Bank 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 Bank will offset losses from the drop in Habib Bank's long position.| United Bank vs. Habib Bank | United Bank vs. National Bank of | United Bank vs. MCB Bank | United Bank vs. Allied Bank |
| Habib Bank vs. JS Investments | Habib Bank vs. Unity Foods | Habib Bank vs. Unilever Pakistan Foods | Habib Bank vs. Big Bird 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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