Correlation Between Ghani Chemical and Habib Bank
Can any of the company-specific risk be diversified away by investing in both Ghani Chemical 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 Ghani Chemical and Habib Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ghani Chemical Industries and Habib Bank, you can compare the effects of market volatilities on Ghani Chemical 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 Ghani Chemical with a short position of Habib Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ghani Chemical and Habib Bank.
Diversification Opportunities for Ghani Chemical and Habib Bank
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ghani and Habib is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ghani Chemical Industries and Habib Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Bank and Ghani Chemical 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 Ghani Chemical Industries 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 Ghani Chemical i.e., Ghani Chemical and Habib Bank go up and down completely randomly.
Pair Corralation between Ghani Chemical and Habib Bank
Assuming the 90 days trading horizon Ghani Chemical Industries is expected to generate 1.64 times more return on investment than Habib Bank. However, Ghani Chemical is 1.64 times more volatile than Habib Bank. It trades about 0.2 of its potential returns per unit of risk. Habib Bank is currently generating about 0.14 per unit of risk. If you would invest 1,126 in Ghani Chemical Industries on October 26, 2024 and sell it today you would earn a total of 791.00 from holding Ghani Chemical Industries or generate 70.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Ghani Chemical Industries vs. Habib Bank
Performance |
Timeline |
Ghani Chemical Industries |
Habib Bank |
Ghani Chemical and Habib Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ghani Chemical and Habib Bank
The main advantage of trading using opposite Ghani Chemical and Habib Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ghani Chemical 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.Ghani Chemical vs. Orient Rental Modaraba | ||
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Check out your portfolio center.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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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