Correlation Between Bank Alfalah and National Foods

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Can any of the company-specific risk be diversified away by investing in both Bank Alfalah and National Foods 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 National Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Alfalah and National Foods, you can compare the effects of market volatilities on Bank Alfalah and National Foods 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 National Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Alfalah and National Foods.

Diversification Opportunities for Bank Alfalah and National Foods

BankNationalDiversified AwayBankNationalDiversified Away100%
0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Bank and National is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bank Alfalah and National Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Foods 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 National Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Foods has no effect on the direction of Bank Alfalah i.e., Bank Alfalah and National Foods go up and down completely randomly.

Pair Corralation between Bank Alfalah and National Foods

Assuming the 90 days trading horizon Bank Alfalah is expected to generate 1.68 times more return on investment than National Foods. However, Bank Alfalah is 1.68 times more volatile than National Foods. It trades about 0.15 of its potential returns per unit of risk. National Foods is currently generating about 0.1 per unit of risk. If you would invest  6,646  in Bank Alfalah on October 27, 2024 and sell it today you would earn a total of  1,851  from holding Bank Alfalah or generate 27.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Bank Alfalah  vs.  National Foods

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 051015202530
JavaScript chart by amCharts 3.21.15BAFL NATF
       Timeline  
Bank Alfalah 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
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 weak basic indicators, Bank Alfalah sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan6570758085
National Foods 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in National Foods are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, National Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan160170180190200

Bank Alfalah and National Foods Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-8.68-6.5-4.32-2.140.03632.274.616.959.311.64 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15BAFL NATF
       Returns  

Pair Trading with Bank Alfalah and National Foods

The main advantage of trading using opposite Bank Alfalah and National Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Alfalah position performs unexpectedly, National Foods 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 National Foods will offset losses from the drop in National Foods' long position.
The idea behind Bank Alfalah and National Foods 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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