Correlation Between Pakistan State and Bank Al

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

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

Diversification Opportunities for Pakistan State and Bank Al

-0.36

Correlation Coefficient

Pakistan State  Bank Al

Very good diversification

The 3 months correlation between Pakistan and Bank is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan State Oil and Bank Al Habib in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Al Habib and Pakistan State 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 Pakistan State Oil are associated (or correlated) with Bank Al. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Al Habib has no effect on the direction of Pakistan State i.e., Pakistan State and Bank Al go up and down completely randomly.

Pair Corralation between Pakistan State and Bank Al

Assuming the 90 days trading horizon Pakistan State Oil is expected to under-perform the Bank Al. In addition to that, Pakistan State is 1.84 times more volatile than Bank Al Habib. It trades about -0.02 of its total potential returns per unit of risk. Bank Al Habib is currently generating about 0.12 per unit of volatility. If you would invest  12,808  in Bank Al Habib on December 30, 2024 and sell it today you would earn a total of  1,418  from holding Bank Al Habib or generate 11.07% return on investment over 90 days.

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

Pakistan State Oil  vs.  Bank Al Habib

Pakistan State Oil

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pakistan State Oil has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Pakistan State is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Bank Al Habib

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Al Habib are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bank Al may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pakistan State and Bank Al

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

The idea behind Pakistan State Oil and Bank Al Habib 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.