Correlation Between Fauji Foods and Kohinoor Industries
Can any of the company-specific risk be diversified away by investing in both Fauji Foods and Kohinoor Industries 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 Kohinoor Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fauji Foods and Kohinoor Industries, you can compare the effects of market volatilities on Fauji Foods and Kohinoor Industries 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 Kohinoor Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fauji Foods and Kohinoor Industries.
Diversification Opportunities for Fauji Foods and Kohinoor Industries
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fauji and Kohinoor is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Foods and Kohinoor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kohinoor Industries 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 Kohinoor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kohinoor Industries has no effect on the direction of Fauji Foods i.e., Fauji Foods and Kohinoor Industries go up and down completely randomly.
Pair Corralation between Fauji Foods and Kohinoor Industries
Assuming the 90 days trading horizon Fauji Foods is expected to under-perform the Kohinoor Industries. But the stock apears to be less risky and, when comparing its historical volatility, Fauji Foods is 2.74 times less risky than Kohinoor Industries. The stock trades about -0.14 of its potential returns per unit of risk. The Kohinoor Industries is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 821.00 in Kohinoor Industries on November 28, 2024 and sell it today you would earn a total of 233.00 from holding Kohinoor Industries or generate 28.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Fauji Foods vs. Kohinoor Industries
Performance |
| Timeline |
| Fauji Foods |
| Kohinoor Industries |
Fauji Foods and Kohinoor Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fauji Foods and Kohinoor Industries
The main advantage of trading using opposite Fauji Foods and Kohinoor Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fauji Foods position performs unexpectedly, Kohinoor Industries 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 Kohinoor Industries will offset losses from the drop in Kohinoor Industries' 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 |
| Kohinoor Industries vs. Meezan Bank | Kohinoor Industries vs. JS Bank | Kohinoor Industries vs. Century Insurance | Kohinoor Industries vs. Adamjee Insurance |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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