Correlation Between National Bank and Pakistan Aluminium

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

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

Diversification Opportunities for National Bank and Pakistan Aluminium

0.1

Correlation Coefficient

National Bank  Pakistan Aluminium

Average diversification

The 3 months correlation between National and Pakistan is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Pakistan Aluminium Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Aluminium and National Bank 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 National Bank of are associated (or correlated) with Pakistan Aluminium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Aluminium has no effect on the direction of National Bank i.e., National Bank and Pakistan Aluminium go up and down completely randomly.

Pair Corralation between National Bank and Pakistan Aluminium

Assuming the 90 days trading horizon National Bank of is expected to under-perform the Pakistan Aluminium. In addition to that, National Bank is 1.15 times more volatile than Pakistan Aluminium Beverage. It trades about -0.19 of its total potential returns per unit of risk. Pakistan Aluminium Beverage is currently generating about -0.12 per unit of volatility. If you would invest  13,684  in Pakistan Aluminium Beverage on October 15, 2024 and sell it today you would lose (1,326) from holding Pakistan Aluminium Beverage or give up 9.69% of portfolio value over 90 days.

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

National Bank of  vs.  Pakistan Aluminium Beverage

National Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pakistan Aluminium

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Aluminium Beverage are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pakistan Aluminium sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Bank and Pakistan Aluminium

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

The idea behind National Bank of and Pakistan Aluminium Beverage 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.