Correlation Between Air Link and Faysal Bank

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

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

Diversification Opportunities for Air Link and Faysal Bank

-0.02

Correlation Coefficient

Air Link  Faysal Bank

Good diversification

The 3 months correlation between Air and Faysal is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Air Link Communication and Faysal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faysal Bank and Air Link 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 Air Link Communication 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 Air Link i.e., Air Link and Faysal Bank go up and down completely randomly.

Pair Corralation between Air Link and Faysal Bank

Assuming the 90 days trading horizon Air Link Communication is expected to generate 1.95 times more return on investment than Faysal Bank. However, Air Link is 1.95 times more volatile than Faysal Bank. It trades about 0.47 of its potential returns per unit of risk. Faysal Bank is currently generating about 0.04 per unit of risk. If you would invest  13,419  in Air Link Communication on September 29, 2024 and sell it today you would earn a total of  8,155  from holding Air Link Communication or generate 60.77% return on investment over 90 days.

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

Air Link Communication  vs.  Faysal Bank

Air Link Communication

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Link Communication are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Air Link disclosed solid returns over the last few months and may actually be approaching a breakup point.

Faysal Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Faysal Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Faysal Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Air Link and Faysal Bank

The main advantage of trading using opposite Air Link and Faysal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Link 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 Air Link Communication 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.