Correlation Between EFU General and Dow Jones
Can any of the company-specific risk be diversified away by investing in both EFU General and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on EFU General and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of EFU General and Dow Jones.
Diversification Opportunities for EFU General and Dow Jones
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between EFU and Dow is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of EFU General i.e., EFU General and Dow Jones go up and down completely randomly.
Pair Corralation between EFU General and Dow Jones
Assuming the 90 days trading horizon EFU General Insurance is expected to generate 4.94 times more return on investment than Dow Jones. However, EFU General is 4.94 times more volatile than Dow Jones Industrial. It trades about 0.36 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 per unit of risk. If you would invest 8,855 in EFU General Insurance on August 29, 2024 and sell it today you would earn a total of 3,734 from holding EFU General Insurance or generate 42.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EFU General Insurance vs. Dow Jones Industrial
Performance |
| Timeline |
EFU General and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
EFU General Insurance
Pair trading matchups for EFU General
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with EFU General and Dow Jones
The main advantage of trading using opposite EFU General and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EFU General position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| EFU General vs. Habib Bank | EFU General vs. National Bank of | EFU General vs. United Bank | EFU General vs. MCB Bank |
| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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