Correlation Between Askari Bank and Ittehad Chemicals

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

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

Diversification Opportunities for Askari Bank and Ittehad Chemicals

0.57

Correlation Coefficient

Askari Bank  Ittehad Chemicals

Very weak diversification

The 3 months correlation between Askari and Ittehad is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Askari Bank and Ittehad Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ittehad Chemicals and Askari 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 Askari Bank are associated (or correlated) with Ittehad Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ittehad Chemicals has no effect on the direction of Askari Bank i.e., Askari Bank and Ittehad Chemicals go up and down completely randomly.

Pair Corralation between Askari Bank and Ittehad Chemicals

Assuming the 90 days trading horizon Askari Bank is expected to generate 1.14 times more return on investment than Ittehad Chemicals. However, Askari Bank is 1.14 times more volatile than Ittehad Chemicals. It trades about 0.1 of its potential returns per unit of risk. Ittehad Chemicals is currently generating about 0.07 per unit of risk. If you would invest  3,378  in Askari Bank on December 24, 2024 and sell it today you would earn a total of  501.00  from holding Askari Bank or generate 14.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Askari Bank  vs.  Ittehad Chemicals

Askari Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Askari Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Askari Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Ittehad Chemicals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ittehad Chemicals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ittehad Chemicals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Askari Bank and Ittehad Chemicals

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

The idea behind Askari Bank and Ittehad Chemicals 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.