Correlation Between Masood Textile and Askari Bank

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

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

Diversification Opportunities for Masood Textile and Askari Bank

0.46

Correlation Coefficient

Masood Textile  Askari Bank

Very weak diversification

The 3 months correlation between Masood and Askari is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Masood Textile Mills and Askari Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Askari Bank and Masood Textile 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 Masood Textile Mills are associated (or correlated) with Askari Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Askari Bank has no effect on the direction of Masood Textile i.e., Masood Textile and Askari Bank go up and down completely randomly.

Pair Corralation between Masood Textile and Askari Bank

Assuming the 90 days trading horizon Masood Textile Mills is expected to generate 1.89 times more return on investment than Askari Bank. However, Masood Textile is 1.89 times more volatile than Askari Bank. It trades about 0.06 of its potential returns per unit of risk. Askari Bank is currently generating about 0.09 per unit of risk. If you would invest  3,551  in Masood Textile Mills on October 21, 2024 and sell it today you would earn a total of  2,073  from holding Masood Textile Mills or generate 58.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	55.17%
Values	Daily Returns

Masood Textile Mills  vs.  Askari Bank

Masood Textile Mills

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Masood Textile Mills are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Masood Textile sustained solid returns over the last few months and may actually be approaching a breakup point.

Askari Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Askari Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Askari Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Masood Textile and Askari Bank

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

The idea behind Masood Textile Mills and Askari 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.