Correlation Between Bank Alfalah and ITTEFAQ Iron

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

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

Diversification Opportunities for Bank Alfalah and ITTEFAQ Iron

0.72

Correlation Coefficient

Bank Alfalah  ITTEFAQ Iron

Poor diversification

The 3 months correlation between Bank and ITTEFAQ is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bank Alfalah and ITTEFAQ Iron Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITTEFAQ Iron Industries 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 ITTEFAQ Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITTEFAQ Iron Industries has no effect on the direction of Bank Alfalah i.e., Bank Alfalah and ITTEFAQ Iron go up and down completely randomly.

Pair Corralation between Bank Alfalah and ITTEFAQ Iron

Assuming the 90 days trading horizon Bank Alfalah is expected to under-perform the ITTEFAQ Iron. But the stock apears to be less risky and, when comparing its historical volatility, Bank Alfalah is 3.15 times less risky than ITTEFAQ Iron. The stock trades about -0.03 of its potential returns per unit of risk. The ITTEFAQ Iron Industries is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  697.00  in ITTEFAQ Iron Industries on December 24, 2024 and sell it today you would earn a total of  41.00  from holding ITTEFAQ Iron Industries or generate 5.88% 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.  ITTEFAQ Iron Industries

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 somewhat strong basic indicators, Bank Alfalah is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ITTEFAQ Iron Industries

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ITTEFAQ Iron Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, ITTEFAQ Iron may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bank Alfalah and ITTEFAQ Iron

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

The idea behind Bank Alfalah and ITTEFAQ Iron Industries 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.