Correlation Between Sardar Chemical and Bank Alfalah

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

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

Diversification Opportunities for Sardar Chemical and Bank Alfalah

-0.23

Correlation Coefficient

Sardar Chemical  Bank Alfalah

Very good diversification

The 3 months correlation between Sardar and Bank is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Sardar Chemical Industries and Bank Alfalah in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Alfalah and Sardar Chemical 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 Sardar Chemical Industries are associated (or correlated) with Bank Alfalah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Alfalah has no effect on the direction of Sardar Chemical i.e., Sardar Chemical and Bank Alfalah go up and down completely randomly.

Pair Corralation between Sardar Chemical and Bank Alfalah

Assuming the 90 days trading horizon Sardar Chemical is expected to generate 3.06 times less return on investment than Bank Alfalah. In addition to that, Sardar Chemical is 2.06 times more volatile than Bank Alfalah. It trades about 0.02 of its total potential returns per unit of risk. Bank Alfalah is currently generating about 0.14 per unit of volatility. If you would invest  2,210  in Bank Alfalah on October 26, 2024 and sell it today you would earn a total of  6,187  from holding Bank Alfalah or generate 279.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	54.77%
Values	Daily Returns

Sardar Chemical Industries  vs.  Bank Alfalah

Sardar Chemical Indu

Risk-Adjusted Performance

9 of 100

OK

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

Bank Alfalah

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Sardar Chemical and Bank Alfalah

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

The idea behind Sardar Chemical Industries and Bank Alfalah 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.