Correlation Between Data Agro and Faysal Bank
Can any of the company-specific risk be diversified away by investing in both Data Agro and Faysal 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 Data Agro and Faysal Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Data Agro and Faysal Bank, you can compare the effects of market volatilities on Data Agro and Faysal 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 Data Agro with a short position of Faysal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Data Agro and Faysal Bank.
Diversification Opportunities for Data Agro and Faysal Bank
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Data and Faysal is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Data Agro and Faysal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faysal Bank and Data Agro 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 Data Agro are associated (or correlated) with Faysal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faysal Bank has no effect on the direction of Data Agro i.e., Data Agro and Faysal Bank go up and down completely randomly.
Pair Corralation between Data Agro and Faysal Bank
Assuming the 90 days trading horizon Data Agro is expected to under-perform the Faysal Bank. But the stock apears to be less risky and, when comparing its historical volatility, Data Agro is 1.4 times less risky than Faysal Bank. The stock trades about -0.38 of its potential returns per unit of risk. The Faysal Bank is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 4,965 in Faysal Bank on August 30, 2024 and sell it today you would lose (275.00) from holding Faysal Bank or give up 5.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Data Agro vs. Faysal Bank
Performance |
| Timeline |
| Data Agro |
| Faysal Bank |
Data Agro and Faysal Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Data Agro and Faysal Bank
The main advantage of trading using opposite Data Agro and Faysal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Data Agro position performs unexpectedly, Faysal 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 Faysal Bank will offset losses from the drop in Faysal Bank's long position.| Data Agro vs. Roshan Packages | Data Agro vs. Aisha Steel Mills | Data Agro vs. Crescent Steel Allied | Data Agro vs. Air Link Communication |
| Faysal Bank vs. Jubilee Life Insurance | Faysal Bank vs. EFU General Insurance | Faysal Bank vs. Wah Nobel Chemicals | Faysal Bank vs. Engro Polymer Chemicals |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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