Correlation Between Allied Bank and Loads

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

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

Diversification Opportunities for Allied Bank and Loads

0.77

Correlation Coefficient

Allied Bank  Loads

Poor diversification

The 3 months correlation between Allied and Loads is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Allied Bank and Loads in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loads and Allied 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 Allied Bank are associated (or correlated) with Loads. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loads has no effect on the direction of Allied Bank i.e., Allied Bank and Loads go up and down completely randomly.

Pair Corralation between Allied Bank and Loads

Assuming the 90 days trading horizon Allied Bank is expected to under-perform the Loads. But the stock apears to be less risky and, when comparing its historical volatility, Allied Bank is 1.21 times less risky than Loads. The stock trades about -0.12 of its potential returns per unit of risk. The Loads is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,534  in Loads on October 10, 2024 and sell it today you would lose (37.00) from holding Loads or give up 2.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Allied Bank  vs.  Loads

Allied Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Allied Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Loads

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Loads are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Loads disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allied Bank and Loads

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

The idea behind Allied Bank and Loads 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.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.