Correlation Between Big Bird and Habib Bank

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

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

Diversification Opportunities for Big Bird and Habib Bank

-0.86

Correlation Coefficient

Big Bird  Habib Bank

Pay attention - limited upside

The 3 months correlation between Big and Habib is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Big Bird Foods and Habib Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Bank and Big Bird 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 Big Bird Foods 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 Big Bird i.e., Big Bird and Habib Bank go up and down completely randomly.

Pair Corralation between Big Bird and Habib Bank

Assuming the 90 days trading horizon Big Bird Foods is expected to under-perform the Habib Bank. In addition to that, Big Bird is 1.1 times more volatile than Habib Bank. It trades about -0.14 of its total potential returns per unit of risk. Habib Bank is currently generating about 0.26 per unit of volatility. If you would invest  11,266  in Habib Bank on September 14, 2024 and sell it today you would earn a total of  5,675  from holding Habib Bank or generate 50.37% return on investment over 90 days.

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

Big Bird Foods  vs.  Habib Bank

Big Bird Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Bird Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Habib Bank

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Bank are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Habib Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Big Bird and Habib Bank

The main advantage of trading using opposite Big Bird and Habib Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Bird 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 Big Bird Foods 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 Commodity Directory module to find actively traded commodities issued by global exchanges.