Correlation Between Habib Metropolitan and National Bank

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

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

Diversification Opportunities for Habib Metropolitan and National Bank

0.46

Correlation Coefficient

Habib Metropolitan  National Bank

Very weak diversification

The 3 months correlation between Habib and National is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Habib Metropolitan Bank and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank and Habib Metropolitan 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 Habib Metropolitan Bank are associated (or correlated) with National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of Habib Metropolitan i.e., Habib Metropolitan and National Bank go up and down completely randomly.

Pair Corralation between Habib Metropolitan and National Bank

Assuming the 90 days trading horizon Habib Metropolitan Bank is expected to generate 0.66 times more return on investment than National Bank. However, Habib Metropolitan Bank is 1.51 times less risky than National Bank. It trades about 0.3 of its potential returns per unit of risk. National Bank of is currently generating about 0.12 per unit of risk. If you would invest  6,382  in Habib Metropolitan Bank on August 30, 2024 and sell it today you would earn a total of  2,491  from holding Habib Metropolitan Bank or generate 39.03% return on investment over 90 days.

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

Habib Metropolitan Bank  vs.  National Bank of

Habib Metropolitan Bank

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Metropolitan Bank are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Habib Metropolitan reported solid returns over the last few months and may actually be approaching a breakup point.

National Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, National Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Habib Metropolitan and National Bank

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

The idea behind Habib Metropolitan Bank and National Bank of 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.