Correlation Between Ghandhara Automobile and Habib Metropolitan

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

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

Diversification Opportunities for Ghandhara Automobile and Habib Metropolitan

0.81

Correlation Coefficient

Ghandhara Automobile  Habib Metropolitan

Very poor diversification

The 3 months correlation between Ghandhara and Habib is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ghandhara Automobile and Habib Metropolitan Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Metropolitan Bank and Ghandhara Automobile 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 Ghandhara Automobile are associated (or correlated) with Habib Metropolitan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Metropolitan Bank has no effect on the direction of Ghandhara Automobile i.e., Ghandhara Automobile and Habib Metropolitan go up and down completely randomly.

Pair Corralation between Ghandhara Automobile and Habib Metropolitan

Assuming the 90 days trading horizon Ghandhara Automobile is expected to generate 2.1 times more return on investment than Habib Metropolitan. However, Ghandhara Automobile is 2.1 times more volatile than Habib Metropolitan Bank. It trades about 0.17 of its potential returns per unit of risk. Habib Metropolitan Bank is currently generating about 0.18 per unit of risk. If you would invest  3,338  in Ghandhara Automobile on October 21, 2024 and sell it today you would earn a total of  40,534  from holding Ghandhara Automobile or generate 1214.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	85.27%
Values	Daily Returns

Ghandhara Automobile  vs.  Habib Metropolitan Bank

Ghandhara Automobile

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Ghandhara Automobile are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ghandhara Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

Habib Metropolitan Bank

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Metropolitan Bank are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Habib Metropolitan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ghandhara Automobile and Habib Metropolitan

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

The idea behind Ghandhara Automobile and Habib Metropolitan 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.