Correlation Between KSB Pumps and Habib Metropolitan

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

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

Diversification Opportunities for KSB Pumps and Habib Metropolitan

0.78

Correlation Coefficient

KSB Pumps  Habib Metropolitan

Poor diversification

The 3 months correlation between KSB and Habib is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding KSB Pumps and Habib Metropolitan Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Metropolitan Bank and KSB Pumps 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 KSB Pumps are associated (or correlated) with Habib Metropolitan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Metropolitan Bank has no effect on the direction of KSB Pumps i.e., KSB Pumps and Habib Metropolitan go up and down completely randomly.

Pair Corralation between KSB Pumps and Habib Metropolitan

Assuming the 90 days trading horizon KSB Pumps is expected to generate 6.7 times less return on investment than Habib Metropolitan. But when comparing it to its historical volatility, KSB Pumps is 1.37 times less risky than Habib Metropolitan. It trades about 0.05 of its potential returns per unit of risk. Habib Metropolitan Bank is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  8,274  in Habib Metropolitan Bank on October 17, 2024 and sell it today you would earn a total of  1,476  from holding Habib Metropolitan Bank or generate 17.84% return on investment over 90 days.

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

KSB Pumps  vs.  Habib Metropolitan Bank

KSB Pumps

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KSB Pumps are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KSB Pumps sustained solid returns over the last few months and may actually be approaching a breakup point.

Habib Metropolitan Bank

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Metropolitan Bank are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Habib Metropolitan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KSB Pumps and Habib Metropolitan

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

The idea behind KSB Pumps and Habib Metropolitan 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.