Correlation Between EFU General and Beco Steel
Can any of the company-specific risk be diversified away by investing in both EFU General and Beco Steel 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 Beco Steel 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 Beco Steel, you can compare the effects of market volatilities on EFU General and Beco Steel 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 Beco Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of EFU General and Beco Steel.
Diversification Opportunities for EFU General and Beco Steel
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between EFU and Beco is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and Beco Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beco Steel 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 Beco Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beco Steel has no effect on the direction of EFU General i.e., EFU General and Beco Steel go up and down completely randomly.
Pair Corralation between EFU General and Beco Steel
Assuming the 90 days trading horizon EFU General is expected to generate 1.74 times less return on investment than Beco Steel. In addition to that, EFU General is 1.15 times more volatile than Beco Steel. It trades about 0.03 of its total potential returns per unit of risk. Beco Steel is currently generating about 0.05 per unit of volatility. If you would invest 790.00 in Beco Steel on November 5, 2024 and sell it today you would earn a total of 19.00 from holding Beco Steel or generate 2.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EFU General Insurance vs. Beco Steel
Performance |
| Timeline |
| EFU General Insurance |
| Beco Steel |
EFU General and Beco Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EFU General and Beco Steel
The main advantage of trading using opposite EFU General and Beco Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EFU General position performs unexpectedly, Beco Steel 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 Beco Steel will offset losses from the drop in Beco Steel's long position.| EFU General vs. Pakistan Aluminium Beverage | EFU General vs. Quice Food Industries | EFU General vs. Fauji Foods | EFU General vs. Big Bird Foods |
| Beco Steel vs. Universal Insurance | Beco Steel vs. Pakistan Reinsurance | Beco Steel vs. Avanceon | Beco Steel vs. AKD Hospitality |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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