Correlation Between Habib Sugar and Askari Bank

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

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

Diversification Opportunities for Habib Sugar and Askari Bank

0.87

Correlation Coefficient

Habib Sugar  Askari Bank

Very poor diversification

The 3 months correlation between Habib and Askari is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Habib Sugar Mills and Askari Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Askari Bank and Habib Sugar 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 Habib Sugar Mills are associated (or correlated) with Askari Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Askari Bank has no effect on the direction of Habib Sugar i.e., Habib Sugar and Askari Bank go up and down completely randomly.

Pair Corralation between Habib Sugar and Askari Bank

Assuming the 90 days trading horizon Habib Sugar is expected to generate 1.1 times less return on investment than Askari Bank. But when comparing it to its historical volatility, Habib Sugar Mills is 1.09 times less risky than Askari Bank. It trades about 0.13 of its potential returns per unit of risk. Askari Bank is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,239  in Askari Bank on October 3, 2024 and sell it today you would earn a total of  2,588  from holding Askari Bank or generate 208.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.76%
Values	Daily Returns

Habib Sugar Mills  vs.  Askari Bank

Habib Sugar Mills

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Sugar Mills are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Habib Sugar disclosed solid returns over the last few months and may actually be approaching a breakup point.

Askari Bank

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Askari Bank are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Askari Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Habib Sugar and Askari Bank

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

The idea behind Habib Sugar Mills and Askari 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.