Correlation Between 786 Investment and Faysal Bank

Can any of the company-specific risk be diversified away by investing in both 786 Investment and Faysal 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 786 Investment and Faysal Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 786 Investment Limited and Faysal Bank, you can compare the effects of market volatilities on 786 Investment and Faysal 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 786 Investment with a short position of Faysal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of 786 Investment and Faysal Bank.

Diversification Opportunities for 786 Investment and Faysal Bank

0.14

Correlation Coefficient

786 Investment  Faysal Bank

Average diversification

The 3 months correlation between 786 and Faysal is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding 786 Investment Limited and Faysal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faysal Bank and 786 Investment 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 786 Investment Limited are associated (or correlated) with Faysal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faysal Bank has no effect on the direction of 786 Investment i.e., 786 Investment and Faysal Bank go up and down completely randomly.

Pair Corralation between 786 Investment and Faysal Bank

Assuming the 90 days trading horizon 786 Investment Limited is expected to generate 2.16 times more return on investment than Faysal Bank. However, 786 Investment is 2.16 times more volatile than Faysal Bank. It trades about 0.08 of its potential returns per unit of risk. Faysal Bank is currently generating about 0.04 per unit of risk. If you would invest  676.00  in 786 Investment Limited on September 15, 2024 and sell it today you would earn a total of  131.00  from holding 786 Investment Limited or generate 19.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

786 Investment Limited  vs.  Faysal Bank

786 Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 786 Investment Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, 786 Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Faysal Bank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Faysal Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Faysal Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with 786 Investment and Faysal Bank

The main advantage of trading using opposite 786 Investment and Faysal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 786 Investment position performs unexpectedly, Faysal 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 Faysal Bank will offset losses from the drop in Faysal Bank's long position.

The idea behind 786 Investment Limited and Faysal Bank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.