Correlation Between Habib Sugar and Silkbank

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

Diversification Opportunities for Habib Sugar and Silkbank

0.59

Correlation Coefficient

Habib Sugar  Silkbank

Very weak diversification

The 3 months correlation between Habib and Silkbank is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Habib Sugar Mills and Silkbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silkbank 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 Silkbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silkbank has no effect on the direction of Habib Sugar i.e., Habib Sugar and Silkbank go up and down completely randomly.

Pair Corralation between Habib Sugar and Silkbank

Assuming the 90 days trading horizon Habib Sugar Mills is expected to generate 0.58 times more return on investment than Silkbank. However, Habib Sugar Mills is 1.72 times less risky than Silkbank. It trades about 0.14 of its potential returns per unit of risk. Silkbank is currently generating about 0.05 per unit of risk. If you would invest  6,675  in Habib Sugar Mills on October 12, 2024 and sell it today you would earn a total of  1,368  from holding Habib Sugar Mills or generate 20.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Habib Sugar Mills  vs.  Silkbank

Habib Sugar Mills

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Sugar Mills are ranked lower than 11 (%) 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.

Silkbank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Silkbank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Silkbank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Habib Sugar and Silkbank

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

The idea behind Habib Sugar Mills and Silkbank 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.