Correlation Between United Bank and Nishat Mills
Can any of the company-specific risk be diversified away by investing in both United Bank and Nishat Mills 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 Nishat Mills into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Bank and Nishat Mills, you can compare the effects of market volatilities on United Bank and Nishat Mills 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 Nishat Mills. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Bank and Nishat Mills.
Diversification Opportunities for United Bank and Nishat Mills
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and Nishat is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding United Bank and Nishat Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nishat Mills 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 Nishat Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nishat Mills has no effect on the direction of United Bank i.e., United Bank and Nishat Mills go up and down completely randomly.
Pair Corralation between United Bank and Nishat Mills
Assuming the 90 days trading horizon United Bank is expected to generate 1.2 times less return on investment than Nishat Mills. But when comparing it to its historical volatility, United Bank is 1.31 times less risky than Nishat Mills. It trades about 0.18 of its potential returns per unit of risk. Nishat Mills is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 7,206 in Nishat Mills on September 3, 2024 and sell it today you would earn a total of 486.00 from holding Nishat Mills or generate 6.74% 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. Nishat Mills
Performance |
| Timeline |
| United Bank |
| Nishat Mills |
United Bank and Nishat Mills Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Bank and Nishat Mills
The main advantage of trading using opposite United Bank and Nishat Mills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Bank position performs unexpectedly, Nishat Mills 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 Nishat Mills will offset losses from the drop in Nishat Mills' long position.| United Bank vs. Masood Textile Mills | United Bank vs. Fauji Foods | United Bank vs. KSB Pumps | United Bank vs. Mari Petroleum |
| Nishat Mills vs. Pakistan Tobacco | Nishat Mills vs. Pakistan Aluminium Beverage | Nishat Mills vs. Air Link Communication | Nishat Mills vs. Oil and Gas |
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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