Correlation Between Habib Bank and Artistic Denim

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

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

Diversification Opportunities for Habib Bank and Artistic Denim

0.78

Correlation Coefficient

Habib Bank  Artistic Denim

Poor diversification

The 3 months correlation between Habib and Artistic is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Habib Bank and Artistic Denim Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artistic Denim Mills and Habib Bank 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 Bank are associated (or correlated) with Artistic Denim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artistic Denim Mills has no effect on the direction of Habib Bank i.e., Habib Bank and Artistic Denim go up and down completely randomly.

Pair Corralation between Habib Bank and Artistic Denim

Assuming the 90 days trading horizon Habib Bank is expected to generate 1.41 times more return on investment than Artistic Denim. However, Habib Bank is 1.41 times more volatile than Artistic Denim Mills. It trades about 0.15 of its potential returns per unit of risk. Artistic Denim Mills is currently generating about 0.18 per unit of risk. If you would invest  12,338  in Habib Bank on September 29, 2024 and sell it today you would earn a total of  3,280  from holding Habib Bank or generate 26.58% return on investment over 90 days.

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

Habib Bank  vs.  Artistic Denim Mills

Habib Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Habib Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Artistic Denim Mills

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Artistic Denim Mills are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Artistic Denim sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Habib Bank and Artistic Denim

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

The idea behind Habib Bank and Artistic Denim Mills 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.