Correlation Between EFU General and International Steels
Can any of the company-specific risk be diversified away by investing in both EFU General and International Steels 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 International Steels 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 International Steels, you can compare the effects of market volatilities on EFU General and International Steels 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 International Steels. Check out your portfolio center. Please also check ongoing floating volatility patterns of EFU General and International Steels.
Diversification Opportunities for EFU General and International Steels
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between EFU and International is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and International Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Steels 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 International Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Steels has no effect on the direction of EFU General i.e., EFU General and International Steels go up and down completely randomly.
Pair Corralation between EFU General and International Steels
Assuming the 90 days trading horizon EFU General is expected to generate 1.04 times less return on investment than International Steels. In addition to that, EFU General is 1.32 times more volatile than International Steels. It trades about 0.12 of its total potential returns per unit of risk. International Steels is currently generating about 0.16 per unit of volatility. If you would invest 7,101 in International Steels on October 25, 2024 and sell it today you would earn a total of 2,074 from holding International Steels or generate 29.21% 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. International Steels
Performance |
| Timeline |
| EFU General Insurance |
| International Steels |
EFU General and International Steels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EFU General and International Steels
The main advantage of trading using opposite EFU General and International Steels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EFU General position performs unexpectedly, International Steels 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 International Steels will offset losses from the drop in International Steels' long position.| EFU General vs. Beco Steel | EFU General vs. Pakistan Tobacco | EFU General vs. Ghandhara Automobile | EFU General vs. Fauji Foods |
| International Steels vs. JS Investments | International Steels vs. Bank of Punjab | International Steels vs. Sardar Chemical Industries | International Steels vs. Synthetic Products Enterprises |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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