Correlation Between Masood Textile and Faysal Bank

Can any of the company-specific risk be diversified away by investing in both Masood Textile and Faysal 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 Faysal 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 Faysal Bank, you can compare the effects of market volatilities on Masood Textile and Faysal 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 Faysal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Masood Textile and Faysal Bank.

Diversification Opportunities for Masood Textile and Faysal Bank

-0.4

Correlation Coefficient

Masood Textile  Faysal Bank

Very good diversification

The 3 months correlation between Masood and Faysal is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Masood Textile Mills and Faysal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faysal 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 Faysal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faysal Bank has no effect on the direction of Masood Textile i.e., Masood Textile and Faysal Bank go up and down completely randomly.

Pair Corralation between Masood Textile and Faysal Bank

Assuming the 90 days trading horizon Masood Textile Mills is expected to under-perform the Faysal Bank. In addition to that, Masood Textile is 1.98 times more volatile than Faysal Bank. It trades about 0.0 of its total potential returns per unit of risk. Faysal Bank is currently generating about 0.06 per unit of volatility. If you would invest  4,489  in Faysal Bank on September 13, 2024 and sell it today you would earn a total of  321.00  from holding Faysal Bank or generate 7.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.13%
Values	Daily Returns

Masood Textile Mills  vs.  Faysal Bank

Masood Textile Mills

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Masood Textile Mills has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Masood Textile is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Faysal Bank

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Faysal Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Faysal Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Masood Textile and Faysal Bank

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

The idea behind Masood Textile Mills and Faysal 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.