Correlation Between EFU General and Pak Datacom
Can any of the company-specific risk be diversified away by investing in both EFU General and Pak Datacom 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 Pak Datacom 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 Pak Datacom, you can compare the effects of market volatilities on EFU General and Pak Datacom 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 Pak Datacom. Check out your portfolio center. Please also check ongoing floating volatility patterns of EFU General and Pak Datacom.
Diversification Opportunities for EFU General and Pak Datacom
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between EFU and Pak is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and Pak Datacom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pak Datacom 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 Pak Datacom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pak Datacom has no effect on the direction of EFU General i.e., EFU General and Pak Datacom go up and down completely randomly.
Pair Corralation between EFU General and Pak Datacom
Assuming the 90 days trading horizon EFU General Insurance is expected to generate 0.99 times more return on investment than Pak Datacom. However, EFU General Insurance is 1.01 times less risky than Pak Datacom. It trades about 0.1 of its potential returns per unit of risk. Pak Datacom is currently generating about 0.04 per unit of risk. If you would invest 7,559 in EFU General Insurance on August 31, 2024 and sell it today you would earn a total of 5,930 from holding EFU General Insurance or generate 78.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 71.63% |
| Values | Daily Returns |
EFU General Insurance vs. Pak Datacom
Performance |
| Timeline |
| EFU General Insurance |
| Pak Datacom |
EFU General and Pak Datacom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EFU General and Pak Datacom
The main advantage of trading using opposite EFU General and Pak Datacom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EFU General position performs unexpectedly, Pak Datacom 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 Pak Datacom will offset losses from the drop in Pak Datacom's long position.| EFU General vs. Habib Bank | EFU General vs. National Bank of | EFU General vs. United Bank | EFU General vs. MCB Bank |
| Pak Datacom vs. Matco Foods | Pak Datacom vs. Hi Tech Lubricants | Pak Datacom vs. Security Investment Bank | Pak Datacom vs. Sindh Modaraba Management |
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 Stocks Directory module to find actively traded stocks across global markets.
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