Correlation Between Fauji Cement and Sitara Chemical
Can any of the company-specific risk be diversified away by investing in both Fauji Cement and Sitara Chemical 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 Sitara Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fauji Cement and Sitara Chemical Industries, you can compare the effects of market volatilities on Fauji Cement and Sitara Chemical 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 Sitara Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fauji Cement and Sitara Chemical.
Diversification Opportunities for Fauji Cement and Sitara Chemical
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fauji and Sitara is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Cement and Sitara Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitara Chemical Indu 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 Sitara Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitara Chemical Indu has no effect on the direction of Fauji Cement i.e., Fauji Cement and Sitara Chemical go up and down completely randomly.
Pair Corralation between Fauji Cement and Sitara Chemical
Assuming the 90 days trading horizon Fauji Cement is expected to generate 1.15 times more return on investment than Sitara Chemical. However, Fauji Cement is 1.15 times more volatile than Sitara Chemical Industries. It trades about 0.17 of its potential returns per unit of risk. Sitara Chemical Industries is currently generating about -0.02 per unit of risk. If you would invest 3,483 in Fauji Cement on November 4, 2024 and sell it today you would earn a total of 327.00 from holding Fauji Cement or generate 9.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Fauji Cement vs. Sitara Chemical Industries
Performance |
| Timeline |
| Fauji Cement |
| Sitara Chemical Indu |
Fauji Cement and Sitara Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fauji Cement and Sitara Chemical
The main advantage of trading using opposite Fauji Cement and Sitara Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fauji Cement position performs unexpectedly, Sitara Chemical 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 Sitara Chemical will offset losses from the drop in Sitara Chemical's long position.| Fauji Cement vs. Pak Datacom | Fauji Cement vs. Ittehad Chemicals | Fauji Cement vs. Sardar Chemical Industries | Fauji Cement vs. Unity Foods |
| Sitara Chemical vs. Pakistan Tobacco | Sitara Chemical vs. Data Agro | Sitara Chemical vs. Century Insurance | Sitara Chemical vs. Oil and Gas |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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