Correlation Between Fauji Fertilizer and United Bank
Can any of the company-specific risk be diversified away by investing in both Fauji Fertilizer and United 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 United 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 United Bank, you can compare the effects of market volatilities on Fauji Fertilizer and United 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 United Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fauji Fertilizer and United Bank.
Diversification Opportunities for Fauji Fertilizer and United Bank
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fauji and United is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Fertilizer and United Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United 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 United Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Bank has no effect on the direction of Fauji Fertilizer i.e., Fauji Fertilizer and United Bank go up and down completely randomly.
Pair Corralation between Fauji Fertilizer and United Bank
Assuming the 90 days trading horizon Fauji Fertilizer is expected to generate 1.47 times more return on investment than United Bank. However, Fauji Fertilizer is 1.47 times more volatile than United Bank. It trades about 0.3 of its potential returns per unit of risk. United Bank is currently generating about 0.24 per unit of risk. If you would invest 13,221 in Fauji Fertilizer on August 30, 2024 and sell it today you would earn a total of 19,346 from holding Fauji Fertilizer or generate 146.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fauji Fertilizer vs. United Bank
Performance |
| Timeline |
| Fauji Fertilizer |
| United Bank |
Fauji Fertilizer and United Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fauji Fertilizer and United Bank
The main advantage of trading using opposite Fauji Fertilizer and United Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fauji Fertilizer position performs unexpectedly, United 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 United Bank will offset losses from the drop in United Bank's long position.| Fauji Fertilizer vs. Pakistan Telecommunication | Fauji Fertilizer vs. WorldCall Telecom | Fauji Fertilizer vs. Roshan Packages | Fauji Fertilizer vs. Big Bird Foods |
| United Bank vs. Shaheen Insurance | United Bank vs. Unity Foods | United Bank vs. TPL Insurance | United Bank vs. AKD Hospitality |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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