Correlation Between Synthetic Products and Habib Bank

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

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

Diversification Opportunities for Synthetic Products and Habib Bank

0.03

Correlation Coefficient

Synthetic Products  Habib Bank

Significant diversification

The 3 months correlation between Synthetic and Habib is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Synthetic Products Enterprises and Habib Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Bank and Synthetic Products 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 Synthetic Products Enterprises 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 Synthetic Products i.e., Synthetic Products and Habib Bank go up and down completely randomly.

Pair Corralation between Synthetic Products and Habib Bank

Assuming the 90 days trading horizon Synthetic Products Enterprises is expected to generate 2.02 times more return on investment than Habib Bank. However, Synthetic Products is 2.02 times more volatile than Habib Bank. It trades about 0.12 of its potential returns per unit of risk. Habib Bank is currently generating about 0.09 per unit of risk. If you would invest  1,314  in Synthetic Products Enterprises on December 4, 2024 and sell it today you would earn a total of  2,453  from holding Synthetic Products Enterprises or generate 186.68% return on investment over 90 days.

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

Synthetic Products Enterprises  vs.  Habib Bank

Synthetic Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Synthetic Products Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Synthetic Products is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Synthetic Products and Habib Bank

The main advantage of trading using opposite Synthetic Products and Habib Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synthetic Products 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 Synthetic Products Enterprises 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.