Correlation Between EFU General and Soneri Bank
Can any of the company-specific risk be diversified away by investing in both EFU General and Soneri 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 Soneri 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 Soneri Bank, you can compare the effects of market volatilities on EFU General and Soneri 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 Soneri Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of EFU General and Soneri Bank.
Diversification Opportunities for EFU General and Soneri Bank
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between EFU and Soneri is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and Soneri Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soneri 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 Soneri Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soneri Bank has no effect on the direction of EFU General i.e., EFU General and Soneri Bank go up and down completely randomly.
Pair Corralation between EFU General and Soneri Bank
Assuming the 90 days trading horizon EFU General Insurance is expected to under-perform the Soneri Bank. In addition to that, EFU General is 2.65 times more volatile than Soneri Bank. It trades about -0.12 of its total potential returns per unit of risk. Soneri Bank is currently generating about 0.26 per unit of volatility. If you would invest 1,600 in Soneri Bank on January 15, 2025 and sell it today you would earn a total of 77.00 from holding Soneri Bank or generate 4.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EFU General Insurance vs. Soneri Bank
Performance |
| Timeline |
| EFU General Insurance |
| Soneri Bank |
EFU General and Soneri Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EFU General and Soneri Bank
The main advantage of trading using opposite EFU General and Soneri Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EFU General position performs unexpectedly, Soneri 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 Soneri Bank will offset losses from the drop in Soneri Bank's long position.| EFU General vs. Askari General Insurance | EFU General vs. Air Link Communication | EFU General vs. Shaheen Insurance | EFU General vs. National Foods |
| Soneri Bank vs. Masood Textile Mills | Soneri Bank vs. Fauji Foods | Soneri Bank vs. KSB Pumps | Soneri Bank vs. Mari Petroleum |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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