Correlation Between Fauji Foods and Askari Bank
Can any of the company-specific risk be diversified away by investing in both Fauji Foods 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 Foods 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 Foods and Askari Bank, you can compare the effects of market volatilities on Fauji Foods 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 Foods with a short position of Askari Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fauji Foods and Askari Bank.
Diversification Opportunities for Fauji Foods and Askari Bank
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fauji and Askari is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Foods and Askari Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Askari Bank and Fauji Foods 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 Foods 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 Foods i.e., Fauji Foods and Askari Bank go up and down completely randomly.
Pair Corralation between Fauji Foods and Askari Bank
Assuming the 90 days trading horizon Fauji Foods is expected to under-perform the Askari Bank. But the stock apears to be less risky and, when comparing its historical volatility, Fauji Foods is 1.51 times less risky than Askari Bank. The stock trades about -0.14 of its potential returns per unit of risk. The Askari Bank is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,007 in Askari Bank on November 28, 2024 and sell it today you would earn a total of 65.00 from holding Askari Bank or generate 1.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fauji Foods vs. Askari Bank
Performance |
| Timeline |
| Fauji Foods |
| Askari Bank |
Fauji Foods and Askari Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fauji Foods and Askari Bank
The main advantage of trading using opposite Fauji Foods and Askari Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fauji Foods 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 Foods vs. Mughal Iron Steel | Fauji Foods vs. Wah Nobel Chemicals | Fauji Foods vs. Amreli Steels | Fauji Foods vs. Engro Polymer Chemicals |
| Askari Bank vs. Oil and Gas | Askari Bank vs. 786 Investment Limited | Askari Bank vs. Big Bird Foods | Askari Bank vs. Sitara Chemical Industries |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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