Correlation Between Escorts Investment and Faysal Bank
Can any of the company-specific risk be diversified away by investing in both Escorts Investment and Faysal 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 Escorts Investment and Faysal Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Escorts Investment Bank and Faysal Bank, you can compare the effects of market volatilities on Escorts Investment and Faysal 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 Escorts Investment with a short position of Faysal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Escorts Investment and Faysal Bank.
Diversification Opportunities for Escorts Investment and Faysal Bank
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Escorts and Faysal is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Escorts Investment Bank and Faysal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faysal Bank and Escorts Investment 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 Escorts Investment Bank are associated (or correlated) with Faysal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faysal Bank has no effect on the direction of Escorts Investment i.e., Escorts Investment and Faysal Bank go up and down completely randomly.
Pair Corralation between Escorts Investment and Faysal Bank
Assuming the 90 days trading horizon Escorts Investment is expected to generate 1.07 times less return on investment than Faysal Bank. In addition to that, Escorts Investment is 1.18 times more volatile than Faysal Bank. It trades about 0.14 of its total potential returns per unit of risk. Faysal Bank is currently generating about 0.17 per unit of volatility. If you would invest 4,850 in Faysal Bank on August 27, 2024 and sell it today you would earn a total of 363.00 from holding Faysal Bank or generate 7.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Escorts Investment Bank vs. Faysal Bank
Performance |
| Timeline |
| Escorts Investment Bank |
| Faysal Bank |
Escorts Investment and Faysal Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Escorts Investment and Faysal Bank
The main advantage of trading using opposite Escorts Investment and Faysal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Escorts Investment position performs unexpectedly, Faysal 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 Faysal Bank will offset losses from the drop in Faysal Bank's long position.| Escorts Investment vs. Masood Textile Mills | Escorts Investment vs. Fauji Foods | Escorts Investment vs. KSB Pumps | Escorts Investment vs. Mari Petroleum |
| Faysal Bank vs. Jubilee Life Insurance | Faysal Bank vs. Pakistan Synthetics | Faysal Bank vs. Honda Atlas Cars | Faysal Bank vs. Atlas 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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