Correlation Between Bank Alfalah and Aisha Steel

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

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

Diversification Opportunities for Bank Alfalah and Aisha Steel

0.75

Correlation Coefficient

Bank Alfalah  Aisha Steel

Poor diversification

The 3 months correlation between Bank and Aisha is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Bank Alfalah and Aisha Steel Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aisha Steel Mills and Bank Alfalah 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 Bank Alfalah are associated (or correlated) with Aisha Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aisha Steel Mills has no effect on the direction of Bank Alfalah i.e., Bank Alfalah and Aisha Steel go up and down completely randomly.

Pair Corralation between Bank Alfalah and Aisha Steel

Assuming the 90 days trading horizon Bank Alfalah is expected to generate 2.18 times less return on investment than Aisha Steel. But when comparing it to its historical volatility, Bank Alfalah is 1.29 times less risky than Aisha Steel. It trades about 0.17 of its potential returns per unit of risk. Aisha Steel Mills is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  715.00  in Aisha Steel Mills on October 11, 2024 and sell it today you would earn a total of  442.00  from holding Aisha Steel Mills or generate 61.82% return on investment over 90 days.

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

Bank Alfalah  vs.  Aisha Steel Mills

Bank Alfalah

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Alfalah are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Bank Alfalah sustained solid returns over the last few months and may actually be approaching a breakup point.

Aisha Steel Mills

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aisha Steel Mills are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Aisha Steel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Alfalah and Aisha Steel

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

The idea behind Bank Alfalah and Aisha Steel Mills 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.