Correlation Between Faysal Bank and National Foods
Can any of the company-specific risk be diversified away by investing in both Faysal Bank and National Foods 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 Faysal Bank and National Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Faysal Bank and National Foods, you can compare the effects of market volatilities on Faysal Bank and National Foods 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 Faysal Bank with a short position of National Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faysal Bank and National Foods.
Diversification Opportunities for Faysal Bank and National Foods
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Faysal and National is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Faysal Bank and National Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Foods and Faysal Bank 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 Faysal Bank are associated (or correlated) with National Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Foods has no effect on the direction of Faysal Bank i.e., Faysal Bank and National Foods go up and down completely randomly.
Pair Corralation between Faysal Bank and National Foods
Assuming the 90 days trading horizon Faysal Bank is expected to generate 1.39 times more return on investment than National Foods. However, Faysal Bank is 1.39 times more volatile than National Foods. It trades about 0.17 of its potential returns per unit of risk. National Foods is currently generating about 0.04 per unit of risk. If you would invest 4,557 in Faysal Bank on August 26, 2024 and sell it today you would earn a total of 656.00 from holding Faysal Bank or generate 14.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Faysal Bank vs. National Foods
Performance |
| Timeline |
| Faysal Bank |
| National Foods |
Faysal Bank and National Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Faysal Bank and National Foods
The main advantage of trading using opposite Faysal Bank and National Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faysal Bank position performs unexpectedly, National Foods 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 Foods will offset losses from the drop in National Foods' long position.| Faysal Bank vs. Masood Textile Mills | Faysal Bank vs. Fauji Foods | Faysal Bank vs. KSB Pumps | Faysal Bank vs. Mari Petroleum |
| National Foods vs. Faysal Bank | National Foods vs. Unilever Pakistan Foods | National Foods vs. Soneri Bank | National Foods vs. The Organic Meat |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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