Correlation Between Habib Sugar and Habib Metropolitan

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

Diversification Opportunities for Habib Sugar and Habib Metropolitan

0.87

Correlation Coefficient

Habib Sugar  Habib Metropolitan

Very poor diversification

The 3 months correlation between Habib and Habib is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Habib Sugar Mills 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 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 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 Habib Sugar i.e., Habib Sugar and Habib Metropolitan go up and down completely randomly.

Pair Corralation between Habib Sugar and Habib Metropolitan

Assuming the 90 days trading horizon Habib Sugar Mills is expected to generate 1.32 times more return on investment than Habib Metropolitan. However, Habib Sugar is 1.32 times more volatile than Habib Metropolitan Bank. It trades about 0.11 of its potential returns per unit of risk. Habib Metropolitan Bank is currently generating about 0.13 per unit of risk. If you would invest  4,469  in Habib Sugar Mills on October 3, 2024 and sell it today you would earn a total of  3,620  from holding Habib Sugar Mills or generate 81.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.62%
Values	Daily Returns

Habib Sugar Mills  vs.  Habib Metropolitan 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.

Habib Metropolitan Bank

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Metropolitan Bank are ranked lower than 16 (%) 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 Habib Sugar and Habib Metropolitan

The main advantage of trading using opposite Habib Sugar and Habib Metropolitan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Habib Sugar 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 Habib Sugar Mills 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.