Correlation Between Shifa International and Habib Bank

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

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

Diversification Opportunities for Shifa International and Habib Bank

0.63

Correlation Coefficient

Shifa International  Habib Bank

Poor diversification

The 3 months correlation between Shifa and Habib is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Shifa International Hospitals and Habib Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Bank and Shifa International 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 Shifa International Hospitals are associated (or correlated) with Habib Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Bank has no effect on the direction of Shifa International i.e., Shifa International and Habib Bank go up and down completely randomly.

Pair Corralation between Shifa International and Habib Bank

Assuming the 90 days trading horizon Shifa International is expected to generate 5.42 times less return on investment than Habib Bank. In addition to that, Shifa International is 1.22 times more volatile than Habib Bank. It trades about 0.01 of its total potential returns per unit of risk. Habib Bank is currently generating about 0.08 per unit of volatility. If you would invest  17,416  in Habib Bank on October 7, 2024 and sell it today you would earn a total of  734.00  from holding Habib Bank or generate 4.21% return on investment over 90 days.

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

Shifa International Hospitals  vs.  Habib Bank

Shifa International

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shifa International Hospitals are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shifa International sustained solid returns over the last few months and may actually be approaching a breakup point.

Habib Bank

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Bank are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Habib Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shifa International and Habib Bank

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

The idea behind Shifa International Hospitals and Habib 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.