Correlation Between Habib Bank and Meezan Bank

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

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

Diversification Opportunities for Habib Bank and Meezan Bank

0.06

Correlation Coefficient

Habib Bank  Meezan Bank

Significant diversification

The 3 months correlation between Habib and Meezan is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Habib Bank and Meezan Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meezan Bank 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 Meezan Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meezan Bank has no effect on the direction of Habib Bank i.e., Habib Bank and Meezan Bank go up and down completely randomly.

Pair Corralation between Habib Bank and Meezan Bank

Assuming the 90 days trading horizon Habib Bank is expected to under-perform the Meezan Bank. In addition to that, Habib Bank is 1.0 times more volatile than Meezan Bank. It trades about -0.12 of its total potential returns per unit of risk. Meezan Bank is currently generating about 0.07 per unit of volatility. If you would invest  23,665  in Meezan Bank on December 28, 2024 and sell it today you would earn a total of  1,075  from holding Meezan Bank or generate 4.54% return on investment over 90 days.

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

Habib Bank  vs.  Meezan Bank

Habib Bank

Risk-Adjusted Performance

Weak

Over the last 90 days Habib Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Meezan Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Meezan Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Meezan Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Habib Bank and Meezan Bank

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

The idea behind Habib Bank and Meezan 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.