Correlation Between Fauji Cement and Shifa International
Can any of the company-specific risk be diversified away by investing in both Fauji Cement and Shifa 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 Fauji Cement and Shifa International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fauji Cement and Shifa International Hospitals, you can compare the effects of market volatilities on Fauji Cement and Shifa 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 Fauji Cement with a short position of Shifa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fauji Cement and Shifa International.
Diversification Opportunities for Fauji Cement and Shifa International
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fauji and Shifa is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Cement and Shifa International Hospitals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shifa International 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 Shifa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shifa International has no effect on the direction of Fauji Cement i.e., Fauji Cement and Shifa International go up and down completely randomly.
Pair Corralation between Fauji Cement and Shifa International
Assuming the 90 days trading horizon Fauji Cement is expected to under-perform the Shifa International. But the stock apears to be less risky and, when comparing its historical volatility, Fauji Cement is 1.34 times less risky than Shifa International. The stock trades about -0.01 of its potential returns per unit of risk. The Shifa International Hospitals is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 37,316 in Shifa International Hospitals on October 21, 2024 and sell it today you would earn a total of 2,273 from holding Shifa International Hospitals or generate 6.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fauji Cement vs. Shifa International Hospitals
Performance |
| Timeline |
| Fauji Cement |
| Shifa International |
Fauji Cement and Shifa International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fauji Cement and Shifa International
The main advantage of trading using opposite Fauji Cement and Shifa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fauji Cement position performs unexpectedly, Shifa 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 Shifa International will offset losses from the drop in Shifa International'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 |
| Shifa International vs. Wah Nobel Chemicals | Shifa International vs. Pakistan Telecommunication | Shifa International vs. Amreli Steels | Shifa International vs. Ittehad Chemicals |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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