Correlation Between Bank of Punjab and EFU General
Can any of the company-specific risk be diversified away by investing in both Bank of Punjab and EFU General 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 Bank of Punjab and EFU General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of Punjab and EFU General Insurance, you can compare the effects of market volatilities on Bank of Punjab and EFU General 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 Bank of Punjab with a short position of EFU General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Punjab and EFU General.
Diversification Opportunities for Bank of Punjab and EFU General
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and EFU is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Punjab and EFU General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EFU General Insurance and Bank of Punjab 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 Bank of Punjab are associated (or correlated) with EFU General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EFU General Insurance has no effect on the direction of Bank of Punjab i.e., Bank of Punjab and EFU General go up and down completely randomly.
Pair Corralation between Bank of Punjab and EFU General
Assuming the 90 days trading horizon Bank of Punjab is expected to generate 1.11 times more return on investment than EFU General. However, Bank of Punjab is 1.11 times more volatile than EFU General Insurance. It trades about 0.24 of its potential returns per unit of risk. EFU General Insurance is currently generating about 0.12 per unit of risk. If you would invest 553.00 in Bank of Punjab on October 25, 2024 and sell it today you would earn a total of 428.00 from holding Bank of Punjab or generate 77.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Punjab vs. EFU General Insurance
Performance |
| Timeline |
| Bank of Punjab |
| EFU General Insurance |
Bank of Punjab and EFU General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Punjab and EFU General
The main advantage of trading using opposite Bank of Punjab and EFU General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Punjab position performs unexpectedly, EFU General 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 EFU General will offset losses from the drop in EFU General's long position.| Bank of Punjab vs. Ghani Chemical Industries | Bank of Punjab vs. Pak Datacom | Bank of Punjab vs. Wah Nobel Chemicals | Bank of Punjab vs. Ittehad Chemicals |
| EFU General vs. Beco Steel | EFU General vs. Pakistan Tobacco | EFU General vs. Ghandhara Automobile | EFU General vs. Fauji Foods |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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