Correlation Between Habib Sugar and Faysal Bank

Can any of the company-specific risk be diversified away by investing in both Habib Sugar and Faysal 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 Faysal 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 Faysal Bank, you can compare the effects of market volatilities on Habib Sugar and Faysal 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 Faysal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Habib Sugar and Faysal Bank.

Diversification Opportunities for Habib Sugar and Faysal Bank

0.0

Correlation Coefficient

Habib Sugar  Faysal Bank

Pay attention - limited upside

The 3 months correlation between Habib and Faysal is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Habib Sugar Mills and Faysal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faysal 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 Faysal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faysal Bank has no effect on the direction of Habib Sugar i.e., Habib Sugar and Faysal Bank go up and down completely randomly.

Pair Corralation between Habib Sugar and Faysal Bank

Assuming the 90 days trading horizon Habib Sugar is expected to generate 1.04 times less return on investment than Faysal Bank. But when comparing it to its historical volatility, Habib Sugar Mills is 1.02 times less risky than Faysal Bank. It trades about 0.13 of its potential returns per unit of risk. Faysal Bank is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,644  in Faysal Bank on October 3, 2024 and sell it today you would earn a total of  3,204  from holding Faysal Bank or generate 194.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	94.76%
Values	Daily Returns

Habib Sugar Mills  vs.  Faysal 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.

Faysal Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Faysal Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Faysal Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Habib Sugar and Faysal Bank

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

The idea behind Habib Sugar Mills and Faysal 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.