Correlation Between EFU General and Pakistan International
Can any of the company-specific risk be diversified away by investing in both EFU General and Pakistan International 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 Pakistan International 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 Pakistan International Bulk, you can compare the effects of market volatilities on EFU General and Pakistan International 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 Pakistan International. Check out your portfolio center. Please also check ongoing floating volatility patterns of EFU General and Pakistan International.
Diversification Opportunities for EFU General and Pakistan International
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EFU and Pakistan is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and Pakistan International Bulk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan International 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 Pakistan International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan International has no effect on the direction of EFU General i.e., EFU General and Pakistan International go up and down completely randomly.
Pair Corralation between EFU General and Pakistan International
Assuming the 90 days trading horizon EFU General Insurance is expected to under-perform the Pakistan International. But the stock apears to be less risky and, when comparing its historical volatility, EFU General Insurance is 2.43 times less risky than Pakistan International. The stock trades about -0.03 of its potential returns per unit of risk. The Pakistan International Bulk is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 852.00 in Pakistan International Bulk on October 9, 2024 and sell it today you would earn a total of 3.00 from holding Pakistan International Bulk or generate 0.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
EFU General Insurance vs. Pakistan International Bulk
Performance |
| Timeline |
| EFU General Insurance |
| Pakistan International |
EFU General and Pakistan International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EFU General and Pakistan International
The main advantage of trading using opposite EFU General and Pakistan International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EFU General position performs unexpectedly, Pakistan International 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 Pakistan International will offset losses from the drop in Pakistan International's long position.| EFU General vs. Oil and Gas | EFU General vs. Hi Tech Lubricants | EFU General vs. Air Link Communication | EFU General vs. JS Investments |
| Pakistan International vs. Habib Insurance | Pakistan International vs. Ghandhara Automobile | Pakistan International vs. Shadab Textile Mills | Pakistan International vs. Century Insurance |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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