Correlation Between Wah Nobel and Bank Al

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

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

Diversification Opportunities for Wah Nobel and Bank Al

0.62

Correlation Coefficient

Wah Nobel  Bank Al

Poor diversification

The 3 months correlation between Wah and Bank is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Wah Nobel Chemicals 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 Wah Nobel 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 Wah Nobel Chemicals 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 Wah Nobel i.e., Wah Nobel and Bank Al go up and down completely randomly.

Pair Corralation between Wah Nobel and Bank Al

Assuming the 90 days trading horizon Wah Nobel Chemicals is expected to generate 1.53 times more return on investment than Bank Al. However, Wah Nobel is 1.53 times more volatile than Bank Al Habib. It trades about 0.04 of its potential returns per unit of risk. Bank Al Habib is currently generating about 0.02 per unit of risk. If you would invest  23,872  in Wah Nobel Chemicals on October 10, 2024 and sell it today you would earn a total of  330.00  from holding Wah Nobel Chemicals or generate 1.38% return on investment over 90 days.

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

Wah Nobel Chemicals  vs.  Bank Al Habib

Wah Nobel Chemicals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Nobel Chemicals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wah Nobel sustained solid returns over the last few months and may actually be approaching a breakup point.

Bank Al Habib

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Al Habib are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Bank Al sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wah Nobel and Bank Al

The main advantage of trading using opposite Wah Nobel and Bank Al positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wah Nobel 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 Wah Nobel Chemicals 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.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.