Correlation Between Fauji Fertilizer and Askari Bank
Can any of the company-specific risk be diversified away by investing in both Fauji Fertilizer and Askari 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 Fauji Fertilizer and Askari Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fauji Fertilizer and Askari Bank, you can compare the effects of market volatilities on Fauji Fertilizer and Askari 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 Fauji Fertilizer with a short position of Askari Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fauji Fertilizer and Askari Bank.
Diversification Opportunities for Fauji Fertilizer and Askari Bank
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fauji and Askari is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Fertilizer and Askari Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Askari Bank and Fauji Fertilizer 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 Fertilizer are associated (or correlated) with Askari Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Askari Bank has no effect on the direction of Fauji Fertilizer i.e., Fauji Fertilizer and Askari Bank go up and down completely randomly.
Pair Corralation between Fauji Fertilizer and Askari Bank
Assuming the 90 days trading horizon Fauji Fertilizer is expected to generate 0.77 times more return on investment than Askari Bank. However, Fauji Fertilizer is 1.3 times less risky than Askari Bank. It trades about 0.18 of its potential returns per unit of risk. Askari Bank is currently generating about 0.1 per unit of risk. If you would invest 7,793 in Fauji Fertilizer on September 2, 2024 and sell it today you would earn a total of 24,696 from holding Fauji Fertilizer or generate 316.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
Fauji Fertilizer vs. Askari Bank
Performance |
| Timeline |
| Fauji Fertilizer |
| Askari Bank |
Fauji Fertilizer and Askari Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fauji Fertilizer and Askari Bank
The main advantage of trading using opposite Fauji Fertilizer and Askari Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fauji Fertilizer position performs unexpectedly, Askari 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 Askari Bank will offset losses from the drop in Askari Bank's long position.| Fauji Fertilizer vs. Data Agro | Fauji Fertilizer vs. Hi Tech Lubricants | Fauji Fertilizer vs. Reliance Insurance Co | Fauji Fertilizer vs. Pak Gulf Leasing |
| Askari Bank vs. Oil and Gas | Askari Bank vs. Pakistan State Oil | Askari Bank vs. Pakistan Petroleum | Askari Bank vs. Fauji Fertilizer |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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