Correlation Between Fauji Foods and Grays Leasing
Can any of the company-specific risk be diversified away by investing in both Fauji Foods and Grays Leasing 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 Grays Leasing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fauji Foods and Grays Leasing, you can compare the effects of market volatilities on Fauji Foods and Grays Leasing 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 Grays Leasing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fauji Foods and Grays Leasing.
Diversification Opportunities for Fauji Foods and Grays Leasing
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fauji and Grays is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Foods and Grays Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grays Leasing 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 Grays Leasing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grays Leasing has no effect on the direction of Fauji Foods i.e., Fauji Foods and Grays Leasing go up and down completely randomly.
Pair Corralation between Fauji Foods and Grays Leasing
Assuming the 90 days trading horizon Fauji Foods is expected to generate 0.81 times more return on investment than Grays Leasing. However, Fauji Foods is 1.24 times less risky than Grays Leasing. It trades about 0.26 of its potential returns per unit of risk. Grays Leasing is currently generating about 0.03 per unit of risk. If you would invest 1,059 in Fauji Foods on August 30, 2024 and sell it today you would earn a total of 223.00 from holding Fauji Foods or generate 21.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Fauji Foods vs. Grays Leasing
Performance |
| Timeline |
| Fauji Foods |
| Grays Leasing |
Fauji Foods and Grays Leasing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fauji Foods and Grays Leasing
The main advantage of trading using opposite Fauji Foods and Grays Leasing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fauji Foods position performs unexpectedly, Grays Leasing 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 Grays Leasing will offset losses from the drop in Grays Leasing's long position.| Fauji Foods vs. Pakistan Telecommunication | Fauji Foods vs. Grays Leasing | Fauji Foods vs. National Foods | Fauji Foods vs. Sitara Chemical Industries |
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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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