Correlation Between EFU General and Abbott Laboratories
Can any of the company-specific risk be diversified away by investing in both EFU General and Abbott Laboratories 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 EFU General and Abbott Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EFU General Insurance and Abbott Laboratories Pakistan, you can compare the effects of market volatilities on EFU General and Abbott Laboratories 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 EFU General with a short position of Abbott Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of EFU General and Abbott Laboratories.
Diversification Opportunities for EFU General and Abbott Laboratories
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EFU and Abbott is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and Abbott Laboratories Pakistan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories and EFU General 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 EFU General Insurance are associated (or correlated) with Abbott Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abbott Laboratories has no effect on the direction of EFU General i.e., EFU General and Abbott Laboratories go up and down completely randomly.
Pair Corralation between EFU General and Abbott Laboratories
Assuming the 90 days trading horizon EFU General is expected to generate 1.15 times less return on investment than Abbott Laboratories. In addition to that, EFU General is 1.08 times more volatile than Abbott Laboratories Pakistan. It trades about 0.12 of its total potential returns per unit of risk. Abbott Laboratories Pakistan is currently generating about 0.14 per unit of volatility. If you would invest 50,043 in Abbott Laboratories Pakistan on September 3, 2024 and sell it today you would earn a total of 61,825 from holding Abbott Laboratories Pakistan or generate 123.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 79.5% |
| Values | Daily Returns |
EFU General Insurance vs. Abbott Laboratories Pakistan
Performance |
| Timeline |
| EFU General Insurance |
| Abbott Laboratories |
EFU General and Abbott Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EFU General and Abbott Laboratories
The main advantage of trading using opposite EFU General and Abbott Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EFU General position performs unexpectedly, Abbott Laboratories 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 Abbott Laboratories will offset losses from the drop in Abbott Laboratories' long position.| EFU General vs. Oil and Gas | EFU General vs. Pakistan State Oil | EFU General vs. Pakistan Petroleum | EFU General vs. Fauji Fertilizer |
| Abbott Laboratories vs. Silkbank | Abbott Laboratories vs. Reliance Insurance Co | Abbott Laboratories vs. WorldCall Telecom | Abbott Laboratories vs. Meezan Bank |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data |