Correlation Between Asiri Surgical and DFCC Bank

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

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

Diversification Opportunities for Asiri Surgical and DFCC Bank

0.57

Correlation Coefficient

Asiri Surgical  DFCC Bank

Very weak diversification

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

Pair Corralation between Asiri Surgical and DFCC Bank

Assuming the 90 days trading horizon Asiri Surgical is expected to generate 3.83 times less return on investment than DFCC Bank. But when comparing it to its historical volatility, Asiri Surgical Hospital is 1.13 times less risky than DFCC Bank. It trades about 0.14 of its potential returns per unit of risk. DFCC Bank PLC is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest  8,710  in DFCC Bank PLC on October 11, 2024 and sell it today you would earn a total of  2,490  from holding DFCC Bank PLC or generate 28.59% return on investment over 90 days.

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

Asiri Surgical Hospital  vs.  DFCC Bank PLC

Asiri Surgical Hospital

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Asiri Surgical Hospital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Asiri Surgical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

DFCC Bank PLC

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DFCC Bank PLC are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DFCC Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asiri Surgical and DFCC Bank

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

The idea behind Asiri Surgical Hospital and DFCC Bank PLC 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.