Correlation Between EFU General and National Bank
Can any of the company-specific risk be diversified away by investing in both EFU General and National Bank 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 Bank 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 Bank of, you can compare the effects of market volatilities on EFU General and National Bank 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 Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of EFU General and National Bank.
Diversification Opportunities for EFU General and National Bank
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between EFU and National is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank 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 Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of EFU General i.e., EFU General and National Bank go up and down completely randomly.
Pair Corralation between EFU General and National Bank
Assuming the 90 days trading horizon EFU General Insurance is expected to generate 1.4 times more return on investment than National Bank. However, EFU General is 1.4 times more volatile than National Bank of. It trades about 0.37 of its potential returns per unit of risk. National Bank of is currently generating about 0.07 per unit of risk. If you would invest 8,772 in EFU General Insurance on August 30, 2024 and sell it today you would earn a total of 3,914 from holding EFU General Insurance or generate 44.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EFU General Insurance vs. National Bank of
Performance |
| Timeline |
| EFU General Insurance |
| National Bank |
EFU General and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EFU General and National Bank
The main advantage of trading using opposite EFU General and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EFU General position performs unexpectedly, National Bank 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 Bank will offset losses from the drop in National Bank's long position.| EFU General vs. Masood Textile Mills | EFU General vs. Fauji Foods | EFU General vs. KSB Pumps | EFU General vs. Mari Petroleum |
| National Bank vs. Pakistan Synthetics | National Bank vs. Silkbank | National Bank vs. Big Bird Foods | National Bank vs. Ghani Chemical Industries |
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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