Correlation Between Habib Bank and Shifa International

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

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

Diversification Opportunities for Habib Bank and Shifa International

0.54

Correlation Coefficient

Habib Bank  Shifa International

Very weak diversification

The 3 months correlation between Habib and Shifa is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Habib Bank and Shifa International Hospitals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shifa International 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 Shifa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shifa International has no effect on the direction of Habib Bank i.e., Habib Bank and Shifa International go up and down completely randomly.

Pair Corralation between Habib Bank and Shifa International

Assuming the 90 days trading horizon Habib Bank is expected to generate 0.68 times more return on investment than Shifa International. However, Habib Bank is 1.46 times less risky than Shifa International. It trades about 0.14 of its potential returns per unit of risk. Shifa International Hospitals is currently generating about -0.07 per unit of risk. If you would invest  15,963  in Habib Bank on October 17, 2024 and sell it today you would earn a total of  1,224  from holding Habib Bank or generate 7.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Habib Bank  vs.  Shifa International Hospitals

Habib Bank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Bank are ranked lower than 13 (%) 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.

Shifa International

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shifa International Hospitals are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shifa International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Habib Bank and Shifa International

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

The idea behind Habib Bank and Shifa International Hospitals 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.