Correlation Between Quice Food and Habib Bank

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

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

Diversification Opportunities for Quice Food and Habib Bank

0.37

Correlation Coefficient

Quice Food  Habib Bank

Weak diversification

The 3 months correlation between Quice and Habib is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Quice Food Industries and Habib Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Bank and Quice Food 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 Quice Food Industries 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 Quice Food i.e., Quice Food and Habib Bank go up and down completely randomly.

Pair Corralation between Quice Food and Habib Bank

Assuming the 90 days trading horizon Quice Food is expected to generate 1.29 times less return on investment than Habib Bank. In addition to that, Quice Food is 1.87 times more volatile than Habib Bank. It trades about 0.05 of its total potential returns per unit of risk. Habib Bank is currently generating about 0.13 per unit of volatility. If you would invest  5,046  in Habib Bank on September 14, 2024 and sell it today you would earn a total of  11,895  from holding Habib Bank or generate 235.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.76%
Values	Daily Returns

Quice Food Industries  vs.  Habib Bank

Quice Food Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quice Food Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Quice Food is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Habib Bank

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Bank are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Habib Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Quice Food and Habib Bank

The main advantage of trading using opposite Quice Food and Habib Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quice Food 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 Quice Food Industries 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.