Correlation Between EFU General and Fauji Foods
Can any of the company-specific risk be diversified away by investing in both EFU General and Fauji Foods 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 Foods 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 Foods, you can compare the effects of market volatilities on EFU General and Fauji Foods 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 Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of EFU General and Fauji Foods.
Diversification Opportunities for EFU General and Fauji Foods
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between EFU and Fauji is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and Fauji Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fauji Foods 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 Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fauji Foods has no effect on the direction of EFU General i.e., EFU General and Fauji Foods go up and down completely randomly.
Pair Corralation between EFU General and Fauji Foods
Assuming the 90 days trading horizon EFU General Insurance is expected to generate 1.02 times more return on investment than Fauji Foods. However, EFU General is 1.02 times more volatile than Fauji Foods. It trades about 0.08 of its potential returns per unit of risk. Fauji Foods is currently generating about 0.08 per unit of risk. If you would invest 7,489 in EFU General Insurance on September 3, 2024 and sell it today you would earn a total of 6,000 from holding EFU General Insurance or generate 80.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 64.74% |
| Values | Daily Returns |
EFU General Insurance vs. Fauji Foods
Performance |
| Timeline |
| EFU General Insurance |
| Fauji Foods |
EFU General and Fauji Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EFU General and Fauji Foods
The main advantage of trading using opposite EFU General and Fauji Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EFU General position performs unexpectedly, Fauji Foods 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 Foods will offset losses from the drop in Fauji Foods' long position.| EFU General vs. Oil and Gas | EFU General vs. Pakistan State Oil | EFU General vs. Pakistan Petroleum | EFU General vs. Fauji Fertilizer |
| Fauji Foods vs. Atlas Insurance | Fauji Foods vs. United Insurance | Fauji Foods vs. Wah Nobel Chemicals | Fauji Foods vs. Allied 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
Other Complementary Tools
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |