Correlation Between Silkbank and Habib Bank

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

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

Diversification Opportunities for Silkbank and Habib Bank

-0.38

Correlation Coefficient

Silkbank  Habib Bank

Very good diversification

The 3 months correlation between Silkbank and Habib is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Silkbank and Habib Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Bank and Silkbank 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 Silkbank 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 Silkbank i.e., Silkbank and Habib Bank go up and down completely randomly.

Pair Corralation between Silkbank and Habib Bank

Assuming the 90 days trading horizon Silkbank is expected to generate 2.74 times more return on investment than Habib Bank. However, Silkbank is 2.74 times more volatile than Habib Bank. It trades about 0.09 of its potential returns per unit of risk. Habib Bank is currently generating about -0.15 per unit of risk. If you would invest  102.00  in Silkbank on December 31, 2024 and sell it today you would earn a total of  13.00  from holding Silkbank or generate 12.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.71%
Values	Daily Returns

Silkbank  vs.  Habib Bank

Silkbank

Risk-Adjusted Performance

Modest

Over the last 90 days Silkbank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Silkbank sustained solid returns over the last few months and may actually be approaching a breakup point.

Habib Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Habib Bank 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.

Pair Trading with Silkbank and Habib Bank

The main advantage of trading using opposite Silkbank and Habib Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silkbank 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 Silkbank 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.