Correlation Between Fauji Foods and Faysal Bank
Can any of the company-specific risk be diversified away by investing in both Fauji Foods and Faysal 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 Faysal 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 Faysal Bank, you can compare the effects of market volatilities on Fauji Foods and Faysal 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 Faysal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fauji Foods and Faysal Bank.
Diversification Opportunities for Fauji Foods and Faysal Bank
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fauji and Faysal is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Foods and Faysal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faysal 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 Faysal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faysal Bank has no effect on the direction of Fauji Foods i.e., Fauji Foods and Faysal Bank go up and down completely randomly.
Pair Corralation between Fauji Foods and Faysal Bank
Assuming the 90 days trading horizon Fauji Foods is expected to generate 2.2 times less return on investment than Faysal Bank. In addition to that, Fauji Foods is 1.04 times more volatile than Faysal Bank. It trades about 0.06 of its total potential returns per unit of risk. Faysal Bank is currently generating about 0.15 per unit of volatility. If you would invest 2,331 in Faysal Bank on August 25, 2024 and sell it today you would earn a total of 2,882 from holding Faysal Bank or generate 123.64% 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. Faysal Bank
Performance |
| Timeline |
| Fauji Foods |
| Faysal Bank |
Fauji Foods and Faysal Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fauji Foods and Faysal Bank
The main advantage of trading using opposite Fauji Foods and Faysal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fauji Foods position performs unexpectedly, Faysal 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 Faysal Bank will offset losses from the drop in Faysal Bank's long position.| Fauji Foods vs. Amreli Steels | Fauji Foods vs. Security Investment Bank | Fauji Foods vs. Pakistan Aluminium Beverage | Fauji Foods vs. Metropolitan Steel Corp |
| Faysal Bank vs. Masood Textile Mills | Faysal Bank vs. Fauji Foods | Faysal Bank vs. KSB Pumps | Faysal Bank 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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