Correlation Between Hi Tech and Meezan Bank

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

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

Diversification Opportunities for Hi Tech and Meezan Bank

0.13

Correlation Coefficient

Hi Tech  Meezan Bank

Average diversification

The 3 months correlation between HTL and Meezan is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Hi Tech Lubricants and Meezan Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meezan Bank and Hi Tech 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 Hi Tech Lubricants 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 Hi Tech i.e., Hi Tech and Meezan Bank go up and down completely randomly.

Pair Corralation between Hi Tech and Meezan Bank

Assuming the 90 days trading horizon Hi Tech Lubricants is expected to under-perform the Meezan Bank. In addition to that, Hi Tech is 1.22 times more volatile than Meezan Bank. It trades about -0.16 of its total potential returns per unit of risk. Meezan Bank is currently generating about 0.28 per unit of volatility. If you would invest  22,096  in Meezan Bank on October 24, 2024 and sell it today you would earn a total of  2,501  from holding Meezan Bank or generate 11.32% return on investment over 90 days.

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

Hi Tech Lubricants  vs.  Meezan Bank

Hi Tech Lubricants

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hi Tech Lubricants are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Hi Tech reported solid returns over the last few months and may actually be approaching a breakup point.

Meezan Bank

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Hi Tech and Meezan Bank

The main advantage of trading using opposite Hi Tech and Meezan Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hi Tech 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 Hi Tech Lubricants 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.