Correlation Between Fauji Foods and Crescent Star
Can any of the company-specific risk be diversified away by investing in both Fauji Foods and Crescent Star 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 Crescent Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fauji Foods and Crescent Star Insurance, you can compare the effects of market volatilities on Fauji Foods and Crescent Star 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 Crescent Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fauji Foods and Crescent Star.
Diversification Opportunities for Fauji Foods and Crescent Star
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fauji and Crescent is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Foods and Crescent Star Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Star Insurance 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 Crescent Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Star Insurance has no effect on the direction of Fauji Foods i.e., Fauji Foods and Crescent Star go up and down completely randomly.
Pair Corralation between Fauji Foods and Crescent Star
Assuming the 90 days trading horizon Fauji Foods is expected to under-perform the Crescent Star. In addition to that, Fauji Foods is 1.33 times more volatile than Crescent Star Insurance. It trades about -0.26 of its total potential returns per unit of risk. Crescent Star Insurance is currently generating about -0.17 per unit of volatility. If you would invest 305.00 in Crescent Star Insurance on November 7, 2024 and sell it today you would lose (23.00) from holding Crescent Star Insurance or give up 7.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fauji Foods vs. Crescent Star Insurance
Performance |
| Timeline |
| Fauji Foods |
| Crescent Star Insurance |
Fauji Foods and Crescent Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fauji Foods and Crescent Star
The main advantage of trading using opposite Fauji Foods and Crescent Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fauji Foods position performs unexpectedly, Crescent Star 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 Crescent Star will offset losses from the drop in Crescent Star's long position.| Fauji Foods vs. Masood Textile Mills | Fauji Foods vs. KSB Pumps | Fauji Foods vs. Mari Petroleum | Fauji Foods vs. Loads |
| Crescent Star vs. Masood Textile Mills | Crescent Star vs. Fauji Foods | Crescent Star vs. KSB Pumps | Crescent Star 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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