Correlation Between Fauji Fertilizer and Pakistan Synthetics
Can any of the company-specific risk be diversified away by investing in both Fauji Fertilizer and Pakistan Synthetics 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 Pakistan Synthetics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fauji Fertilizer and Pakistan Synthetics, you can compare the effects of market volatilities on Fauji Fertilizer and Pakistan Synthetics 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 Pakistan Synthetics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fauji Fertilizer and Pakistan Synthetics.
Diversification Opportunities for Fauji Fertilizer and Pakistan Synthetics
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fauji and Pakistan is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Fertilizer and Pakistan Synthetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Synthetics 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 Pakistan Synthetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Synthetics has no effect on the direction of Fauji Fertilizer i.e., Fauji Fertilizer and Pakistan Synthetics go up and down completely randomly.
Pair Corralation between Fauji Fertilizer and Pakistan Synthetics
Assuming the 90 days trading horizon Fauji Fertilizer is expected to generate 0.87 times more return on investment than Pakistan Synthetics. However, Fauji Fertilizer is 1.16 times less risky than Pakistan Synthetics. It trades about 0.29 of its potential returns per unit of risk. Pakistan Synthetics is currently generating about 0.2 per unit of risk. If you would invest 27,302 in Fauji Fertilizer on August 25, 2024 and sell it today you would earn a total of 4,931 from holding Fauji Fertilizer or generate 18.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fauji Fertilizer vs. Pakistan Synthetics
Performance |
| Timeline |
| Fauji Fertilizer |
| Pakistan Synthetics |
Fauji Fertilizer and Pakistan Synthetics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fauji Fertilizer and Pakistan Synthetics
The main advantage of trading using opposite Fauji Fertilizer and Pakistan Synthetics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fauji Fertilizer position performs unexpectedly, Pakistan Synthetics 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 Pakistan Synthetics will offset losses from the drop in Pakistan Synthetics' long position.| Fauji Fertilizer vs. Masood Textile Mills | Fauji Fertilizer vs. Fauji Foods | Fauji Fertilizer vs. KSB Pumps | Fauji Fertilizer vs. Mari Petroleum |
| Pakistan Synthetics vs. Masood Textile Mills | Pakistan Synthetics vs. Fauji Foods | Pakistan Synthetics vs. KSB Pumps | Pakistan Synthetics vs. Mari Petroleum |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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