Correlation Between EFU General and National Foods
Can any of the company-specific risk be diversified away by investing in both EFU General and National 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 National 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 National Foods, you can compare the effects of market volatilities on EFU General and National 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 National Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of EFU General and National Foods.
Diversification Opportunities for EFU General and National Foods
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between EFU and National is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and National Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National 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 National Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Foods has no effect on the direction of EFU General i.e., EFU General and National Foods go up and down completely randomly.
Pair Corralation between EFU General and National Foods
Assuming the 90 days trading horizon EFU General Insurance is expected to under-perform the National Foods. In addition to that, EFU General is 2.37 times more volatile than National Foods. It trades about -0.08 of its total potential returns per unit of risk. National Foods is currently generating about -0.08 per unit of volatility. If you would invest 19,005 in National Foods on October 26, 2024 and sell it today you would lose (412.00) from holding National Foods or give up 2.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EFU General Insurance vs. National Foods
Performance |
| Timeline |
| EFU General Insurance |
| National Foods |
EFU General and National Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EFU General and National Foods
The main advantage of trading using opposite EFU General and National Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EFU General position performs unexpectedly, National 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 National Foods will offset losses from the drop in National Foods' long position.| EFU General vs. Ittehad Chemicals | EFU General vs. Hi Tech Lubricants | EFU General vs. Jubilee Life Insurance | EFU General vs. Fateh Sports Wear |
| National Foods vs. EFU General Insurance | National Foods vs. Reliance Insurance Co | National Foods vs. Century Insurance | National Foods vs. Matco 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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