Correlation Between Data Agro and Habib Bank

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

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

Diversification Opportunities for Data Agro and Habib Bank

-0.59

Correlation Coefficient

Data Agro  Habib Bank

Excellent diversification

The 3 months correlation between Data and Habib is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Data Agro and Habib Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Bank and Data Agro 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 Data Agro 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 Data Agro i.e., Data Agro and Habib Bank go up and down completely randomly.

Pair Corralation between Data Agro and Habib Bank

Assuming the 90 days trading horizon Data Agro is expected to under-perform the Habib Bank. In addition to that, Data Agro is 1.51 times more volatile than Habib Bank. It trades about -0.05 of its total potential returns per unit of risk. Habib Bank is currently generating about 0.24 per unit of volatility. If you would invest  11,217  in Habib Bank on September 13, 2024 and sell it today you would earn a total of  5,197  from holding Habib Bank or generate 46.33% return on investment over 90 days.

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

Data Agro  vs.  Habib Bank

Data Agro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Data Agro 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.

Habib Bank

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Bank are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Habib Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Data Agro and Habib Bank

The main advantage of trading using opposite Data Agro and Habib Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Data Agro 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 Data Agro 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.