Correlation Between Ittehad Chemicals and Habib Bank

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

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

Diversification Opportunities for Ittehad Chemicals and Habib Bank

0.24

Correlation Coefficient

Ittehad Chemicals  Habib Bank

Modest diversification

The 3 months correlation between Ittehad and Habib is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ittehad Chemicals and Habib Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Bank and Ittehad Chemicals 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 Ittehad Chemicals are associated (or correlated) with Habib Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Bank has no effect on the direction of Ittehad Chemicals i.e., Ittehad Chemicals and Habib Bank go up and down completely randomly.

Pair Corralation between Ittehad Chemicals and Habib Bank

Assuming the 90 days trading horizon Ittehad Chemicals is expected to generate 1.44 times more return on investment than Habib Bank. However, Ittehad Chemicals is 1.44 times more volatile than Habib Bank. It trades about 0.02 of its potential returns per unit of risk. Habib Bank is currently generating about -0.13 per unit of risk. If you would invest  7,223  in Ittehad Chemicals on December 2, 2024 and sell it today you would earn a total of  44.00  from holding Ittehad Chemicals or generate 0.61% return on investment over 90 days.

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

Ittehad Chemicals  vs.  Habib Bank

Ittehad Chemicals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ittehad Chemicals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Ittehad Chemicals is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Habib Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Habib Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Ittehad Chemicals and Habib Bank

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

The idea behind Ittehad Chemicals and Habib 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.