Correlation Between Alfalah Consumer and National Bank

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

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

Diversification Opportunities for Alfalah Consumer and National Bank

0.44

Correlation Coefficient

Alfalah Consumer  National Bank

Very weak diversification

The 3 months correlation between Alfalah and National is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Alfalah Consumer and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank and Alfalah Consumer 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 Alfalah Consumer are associated (or correlated) with National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of Alfalah Consumer i.e., Alfalah Consumer and National Bank go up and down completely randomly.

Pair Corralation between Alfalah Consumer and National Bank

Assuming the 90 days trading horizon Alfalah Consumer is expected to generate 0.8 times more return on investment than National Bank. However, Alfalah Consumer is 1.25 times less risky than National Bank. It trades about 0.26 of its potential returns per unit of risk. National Bank of is currently generating about -0.07 per unit of risk. If you would invest  1,120  in Alfalah Consumer on September 26, 2024 and sell it today you would earn a total of  369.00  from holding Alfalah Consumer or generate 32.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	92.86%
Values	Daily Returns

Alfalah Consumer  vs.  National Bank of

Alfalah Consumer

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alfalah Consumer are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Alfalah Consumer sustained solid returns over the last few months and may actually be approaching a breakup point.

National Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, National Bank is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Alfalah Consumer and National Bank

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

The idea behind Alfalah Consumer and National Bank of 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.