Correlation Between EFU General and JS Investments
Can any of the company-specific risk be diversified away by investing in both EFU General and JS Investments 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 JS Investments 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 JS Investments, you can compare the effects of market volatilities on EFU General and JS Investments 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 JS Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of EFU General and JS Investments.
Diversification Opportunities for EFU General and JS Investments
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between EFU and JSIL is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and JS Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JS Investments 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 JS Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JS Investments has no effect on the direction of EFU General i.e., EFU General and JS Investments go up and down completely randomly.
Pair Corralation between EFU General and JS Investments
Assuming the 90 days trading horizon EFU General Insurance is expected to generate 0.76 times more return on investment than JS Investments. However, EFU General Insurance is 1.32 times less risky than JS Investments. It trades about 0.1 of its potential returns per unit of risk. JS Investments is currently generating about 0.07 per unit of risk. If you would invest 7,993 in EFU General Insurance on September 4, 2024 and sell it today you would earn a total of 5,007 from holding EFU General Insurance or generate 62.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 96.95% |
| Values | Daily Returns |
EFU General Insurance vs. JS Investments
Performance |
| Timeline |
| EFU General Insurance |
| JS Investments |
EFU General and JS Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EFU General and JS Investments
The main advantage of trading using opposite EFU General and JS Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EFU General position performs unexpectedly, JS Investments 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 JS Investments will offset losses from the drop in JS Investments' long position.| EFU General vs. Oil and Gas | EFU General vs. Pakistan State Oil | EFU General vs. Pakistan Petroleum | EFU General vs. Fauji Fertilizer |
| JS Investments vs. Masood Textile Mills | JS Investments vs. Fauji Foods | JS Investments vs. KSB Pumps | JS Investments vs. Mari Petroleum |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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