Correlation Between Alfalah Consumer and Tariq CorpPref

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

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

Diversification Opportunities for Alfalah Consumer and Tariq CorpPref

-0.71

Correlation Coefficient

Alfalah Consumer  Tariq CorpPref

Pay attention - limited upside

The 3 months correlation between Alfalah and Tariq is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Alfalah Consumer and Tariq CorpPref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tariq CorpPref 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 Tariq CorpPref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tariq CorpPref has no effect on the direction of Alfalah Consumer i.e., Alfalah Consumer and Tariq CorpPref go up and down completely randomly.

Pair Corralation between Alfalah Consumer and Tariq CorpPref

Assuming the 90 days trading horizon Alfalah Consumer is expected to generate 1.2 times less return on investment than Tariq CorpPref. In addition to that, Alfalah Consumer is 1.28 times more volatile than Tariq CorpPref. It trades about 0.07 of its total potential returns per unit of risk. Tariq CorpPref is currently generating about 0.1 per unit of volatility. If you would invest  355.00  in Tariq CorpPref on September 28, 2024 and sell it today you would earn a total of  345.00  from holding Tariq CorpPref or generate 97.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	58.09%
Values	Daily Returns

Alfalah Consumer  vs.  Tariq CorpPref

Alfalah Consumer

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alfalah Consumer are ranked lower than 22 (%) 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.

Tariq CorpPref

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tariq CorpPref has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Alfalah Consumer and Tariq CorpPref

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

The idea behind Alfalah Consumer and Tariq CorpPref 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.