Correlation Between Artistic Denim and Habib Bank

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

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

Diversification Opportunities for Artistic Denim and Habib Bank

0.67

Correlation Coefficient

Artistic Denim  Habib Bank

Poor diversification

The 3 months correlation between Artistic and Habib is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Artistic Denim Mills and Habib Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Bank and Artistic Denim 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 Artistic Denim Mills are associated (or correlated) with Habib Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Bank has no effect on the direction of Artistic Denim i.e., Artistic Denim and Habib Bank go up and down completely randomly.

Pair Corralation between Artistic Denim and Habib Bank

Assuming the 90 days trading horizon Artistic Denim Mills is expected to under-perform the Habib Bank. But the stock apears to be less risky and, when comparing its historical volatility, Artistic Denim Mills is 1.1 times less risky than Habib Bank. The stock trades about -0.1 of its potential returns per unit of risk. The Habib Bank is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  15,401  in Habib Bank on December 24, 2024 and sell it today you would lose (167.00) from holding Habib Bank or give up 1.08% of portfolio value over 90 days.

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

Artistic Denim Mills  vs.  Habib Bank

Artistic Denim Mills

Risk-Adjusted Performance

Very Weak

Over the last 90 days Artistic Denim Mills has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Habib Bank

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Artistic Denim and Habib Bank

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

The idea behind Artistic Denim Mills and Habib 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.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.