Correlation Between Habib Bank and Security Investment

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

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

Diversification Opportunities for Habib Bank and Security Investment

0.05

Correlation Coefficient

Habib Bank  Security Investment

Significant diversification

The 3 months correlation between Habib and Security is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Habib Bank and Security Investment Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Security Investment 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 Security Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Security Investment Bank has no effect on the direction of Habib Bank i.e., Habib Bank and Security Investment go up and down completely randomly.

Pair Corralation between Habib Bank and Security Investment

Assuming the 90 days trading horizon Habib Bank is expected to generate 2.83 times less return on investment than Security Investment. But when comparing it to its historical volatility, Habib Bank is 2.54 times less risky than Security Investment. It trades about 0.11 of its potential returns per unit of risk. Security Investment Bank is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  412.00  in Security Investment Bank on September 29, 2024 and sell it today you would earn a total of  387.00  from holding Security Investment Bank or generate 93.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.8%
Values	Daily Returns

Habib Bank  vs.  Security Investment Bank

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.

Security Investment Bank

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Security Investment Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Security Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Habib Bank and Security Investment

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

The idea behind Habib Bank and Security Investment 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.