Correlation Between Bank Alfalah and Hi Tech

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

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

Diversification Opportunities for Bank Alfalah and Hi Tech

0.71

Correlation Coefficient

Bank Alfalah  Hi Tech

Poor diversification

The 3 months correlation between Bank and HTL is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bank Alfalah and Hi Tech Lubricants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Tech Lubricants 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 Hi Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Tech Lubricants has no effect on the direction of Bank Alfalah i.e., Bank Alfalah and Hi Tech go up and down completely randomly.

Pair Corralation between Bank Alfalah and Hi Tech

Assuming the 90 days trading horizon Bank Alfalah is expected to generate 0.46 times more return on investment than Hi Tech. However, Bank Alfalah is 2.16 times less risky than Hi Tech. It trades about -0.16 of its potential returns per unit of risk. Hi Tech Lubricants is currently generating about -0.09 per unit of risk. If you would invest  8,309  in Bank Alfalah on December 29, 2024 and sell it today you would lose (996.00) from holding Bank Alfalah or give up 11.99% of portfolio value over 90 days.

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

Bank Alfalah  vs.  Hi Tech Lubricants

Bank Alfalah

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Alfalah has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hi Tech Lubricants

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hi Tech Lubricants has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Bank Alfalah and Hi Tech

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

The idea behind Bank Alfalah and Hi Tech Lubricants 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.