Correlation Between EFU General and Fauji Cement
Can any of the company-specific risk be diversified away by investing in both EFU General and Fauji Cement 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 Fauji Cement 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 Fauji Cement, you can compare the effects of market volatilities on EFU General and Fauji Cement 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 Fauji Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of EFU General and Fauji Cement.
Diversification Opportunities for EFU General and Fauji Cement
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between EFU and Fauji is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and Fauji Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fauji Cement 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 Fauji Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fauji Cement has no effect on the direction of EFU General i.e., EFU General and Fauji Cement go up and down completely randomly.
Pair Corralation between EFU General and Fauji Cement
Assuming the 90 days trading horizon EFU General is expected to generate 1.01 times less return on investment than Fauji Cement. In addition to that, EFU General is 1.09 times more volatile than Fauji Cement. It trades about 0.05 of its total potential returns per unit of risk. Fauji Cement is currently generating about 0.05 per unit of volatility. If you would invest 3,707 in Fauji Cement on November 3, 2024 and sell it today you would earn a total of 103.00 from holding Fauji Cement or generate 2.78% 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. Fauji Cement
Performance |
| Timeline |
| EFU General Insurance |
| Fauji Cement |
EFU General and Fauji Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EFU General and Fauji Cement
The main advantage of trading using opposite EFU General and Fauji Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EFU General position performs unexpectedly, Fauji Cement 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 Fauji Cement will offset losses from the drop in Fauji Cement's long position.| EFU General vs. Mughal Iron Steel | EFU General vs. Pakistan Telecommunication | EFU General vs. 786 Investment Limited | EFU General vs. Oil and Gas |
| Fauji Cement vs. Pak Datacom | Fauji Cement vs. Ittehad Chemicals | Fauji Cement vs. Sardar Chemical Industries | Fauji Cement vs. Unity 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 CEOs Directory module to screen CEOs from public companies around the world.
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