Correlation Between Wah Nobel and Allied Bank
Can any of the company-specific risk be diversified away by investing in both Wah Nobel and Allied 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 Wah Nobel and Allied Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wah Nobel Chemicals and Allied Bank, you can compare the effects of market volatilities on Wah Nobel and Allied 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 Wah Nobel with a short position of Allied Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wah Nobel and Allied Bank.
Diversification Opportunities for Wah Nobel and Allied Bank
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wah and Allied is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Wah Nobel Chemicals and Allied Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Bank and Wah Nobel 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 Wah Nobel Chemicals are associated (or correlated) with Allied Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Bank has no effect on the direction of Wah Nobel i.e., Wah Nobel and Allied Bank go up and down completely randomly.
Pair Corralation between Wah Nobel and Allied Bank
Assuming the 90 days trading horizon Wah Nobel is expected to generate 1.59 times less return on investment than Allied Bank. In addition to that, Wah Nobel is 1.32 times more volatile than Allied Bank. It trades about 0.11 of its total potential returns per unit of risk. Allied Bank is currently generating about 0.22 per unit of volatility. If you would invest 9,176 in Allied Bank on September 3, 2024 and sell it today you would earn a total of 5,824 from holding Allied Bank or generate 63.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wah Nobel Chemicals vs. Allied Bank
Performance |
| Timeline |
| Wah Nobel Chemicals |
| Allied Bank |
Wah Nobel and Allied Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wah Nobel and Allied Bank
The main advantage of trading using opposite Wah Nobel and Allied Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wah Nobel position performs unexpectedly, Allied 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 Allied Bank will offset losses from the drop in Allied Bank's long position.| Wah Nobel vs. Masood Textile Mills | Wah Nobel vs. Fauji Foods | Wah Nobel vs. KSB Pumps | Wah Nobel vs. Mari Petroleum |
| Allied Bank vs. Ghandhara Automobile | Allied Bank vs. Honda Atlas Cars | Allied Bank vs. Reliance Insurance Co | Allied Bank vs. Silkbank |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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