Correlation Between EFU General and Leather Up
Can any of the company-specific risk be diversified away by investing in both EFU General and Leather Up 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 Leather Up 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 Leather Up, you can compare the effects of market volatilities on EFU General and Leather Up 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 Leather Up. Check out your portfolio center. Please also check ongoing floating volatility patterns of EFU General and Leather Up.
Diversification Opportunities for EFU General and Leather Up
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between EFU and Leather is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and Leather Up in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leather Up 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 Leather Up. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leather Up has no effect on the direction of EFU General i.e., EFU General and Leather Up go up and down completely randomly.
Pair Corralation between EFU General and Leather Up
Assuming the 90 days trading horizon EFU General Insurance is expected to generate 0.68 times more return on investment than Leather Up. However, EFU General Insurance is 1.46 times less risky than Leather Up. It trades about 0.21 of its potential returns per unit of risk. Leather Up is currently generating about 0.11 per unit of risk. If you would invest 8,707 in EFU General Insurance on September 3, 2024 and sell it today you would earn a total of 4,782 from holding EFU General Insurance or generate 54.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 87.3% |
| Values | Daily Returns |
EFU General Insurance vs. Leather Up
Performance |
| Timeline |
| EFU General Insurance |
| Leather Up |
EFU General and Leather Up Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EFU General and Leather Up
The main advantage of trading using opposite EFU General and Leather Up positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EFU General position performs unexpectedly, Leather Up 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 Leather Up will offset losses from the drop in Leather Up's long position.| EFU General vs. Oil and Gas | EFU General vs. Pakistan State Oil | EFU General vs. Pakistan Petroleum | EFU General vs. Fauji Fertilizer |
| Leather Up vs. EFU General Insurance | Leather Up vs. Silkbank | Leather Up vs. Meezan Bank | Leather Up vs. Beco Steel |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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