Correlation Between Fauji Cement and Oil
Can any of the company-specific risk be diversified away by investing in both Fauji Cement and Oil 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 Fauji Cement and Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fauji Cement and Oil and Gas, you can compare the effects of market volatilities on Fauji Cement and Oil 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 Fauji Cement with a short position of Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fauji Cement and Oil.
Diversification Opportunities for Fauji Cement and Oil
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fauji and Oil is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Cement and Oil and Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil and Gas and Fauji Cement 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 Fauji Cement are associated (or correlated) with Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil and Gas has no effect on the direction of Fauji Cement i.e., Fauji Cement and Oil go up and down completely randomly.
Pair Corralation between Fauji Cement and Oil
Assuming the 90 days trading horizon Fauji Cement is expected to generate 1.75 times less return on investment than Oil. But when comparing it to its historical volatility, Fauji Cement is 1.02 times less risky than Oil. It trades about 0.06 of its potential returns per unit of risk. Oil and Gas is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 21,117 in Oil and Gas on October 20, 2024 and sell it today you would earn a total of 1,074 from holding Oil and Gas or generate 5.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fauji Cement vs. Oil and Gas
Performance |
| Timeline |
| Fauji Cement |
| Oil and Gas |
Fauji Cement and Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fauji Cement and Oil
The main advantage of trading using opposite Fauji Cement and Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fauji Cement position performs unexpectedly, Oil 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 Oil will offset losses from the drop in Oil's long position.| Fauji Cement vs. Pakistan Aluminium Beverage | Fauji Cement vs. IBL HealthCare | Fauji Cement vs. Pakistan Tobacco | Fauji Cement vs. Fateh Sports Wear |
| Oil vs. Hi Tech Lubricants | Oil vs. Jubilee Life Insurance | Oil vs. Fateh Sports Wear | Oil vs. Pak Datacom |
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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