Correlation Between Bank Alfalah and Data Agro

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

By analyzing existing cross correlation between Bank Alfalah and Data Agro, you can compare the effects of market volatilities on Bank Alfalah and Data Agro 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 Data Agro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Alfalah and Data Agro.

Diversification Opportunities for Bank Alfalah and Data Agro

0.26

Correlation Coefficient

Bank Alfalah  Data Agro

Modest diversification

The 3 months correlation between Bank and Data is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Bank Alfalah and Data Agro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data Agro 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 Data Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data Agro has no effect on the direction of Bank Alfalah i.e., Bank Alfalah and Data Agro go up and down completely randomly.

Pair Corralation between Bank Alfalah and Data Agro

Assuming the 90 days trading horizon Bank Alfalah is expected to under-perform the Data Agro. But the stock apears to be less risky and, when comparing its historical volatility, Bank Alfalah is 1.73 times less risky than Data Agro. The stock trades about -0.03 of its potential returns per unit of risk. The Data Agro is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  7,716  in Data Agro on September 28, 2024 and sell it today you would earn a total of  5,567  from holding Data Agro or generate 72.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Bank Alfalah  vs.  Data Agro

Bank Alfalah

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Alfalah are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bank Alfalah sustained solid returns over the last few months and may actually be approaching a breakup point.

Data Agro

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Bank Alfalah and Data Agro

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

The idea behind Bank Alfalah and Data Agro 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.