Correlation Between Bank Al and Habib Bank

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

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

Diversification Opportunities for Bank Al and Habib Bank

-0.7

Correlation Coefficient

Bank Al  Habib Bank

Excellent diversification

The 3 months correlation between Bank and Habib is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bank Al Habib and Habib Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Bank and Bank Al 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 Al Habib are associated (or correlated) with Habib Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Bank has no effect on the direction of Bank Al i.e., Bank Al and Habib Bank go up and down completely randomly.

Pair Corralation between Bank Al and Habib Bank

Assuming the 90 days trading horizon Bank Al Habib is expected to generate 1.31 times more return on investment than Habib Bank. However, Bank Al is 1.31 times more volatile than Habib Bank. It trades about 0.12 of its potential returns per unit of risk. Habib Bank is currently generating about -0.12 per unit of risk. If you would invest  12,808  in Bank Al Habib on December 29, 2024 and sell it today you would earn a total of  1,418  from holding Bank Al Habib or generate 11.07% return on investment over 90 days.

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

Bank Al Habib  vs.  Habib Bank

Bank Al Habib

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Al Habib are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bank Al may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Habib Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Habib Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Bank Al and Habib Bank

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

The idea behind Bank Al Habib and Habib Bank 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.