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
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fauji and Crescent is -0.35. 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 generate 0.78 times more return on investment than Crescent Star. However, Fauji Foods is 1.28 times less risky than Crescent Star. It trades about 0.2 of its potential returns per unit of risk. Crescent Star Insurance is currently generating about -0.01 per unit of risk. If you would invest 892.00 in Fauji Foods on August 28, 2024 and sell it today you would earn a total of 334.00 from holding Fauji Foods or generate 37.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| 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. Pak Gulf Leasing | Fauji Foods vs. Air Link Communication | Fauji Foods vs. Shifa International Hospitals | Fauji Foods vs. Grays Leasing |
| Crescent Star vs. National Foods | Crescent Star vs. Avanceon | Crescent Star vs. Security Investment Bank | Crescent Star vs. ITTEFAQ Iron 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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