Correlation Between Fauji Foods and National Refinery
Can any of the company-specific risk be diversified away by investing in both Fauji Foods and National Refinery 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 National Refinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fauji Foods and National Refinery, you can compare the effects of market volatilities on Fauji Foods and National Refinery 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 National Refinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fauji Foods and National Refinery.
Diversification Opportunities for Fauji Foods and National Refinery
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fauji and National is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Foods and National Refinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Refinery 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 National Refinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Refinery has no effect on the direction of Fauji Foods i.e., Fauji Foods and National Refinery go up and down completely randomly.
Pair Corralation between Fauji Foods and National Refinery
Assuming the 90 days trading horizon Fauji Foods is expected to generate 0.9 times more return on investment than National Refinery. However, Fauji Foods is 1.11 times less risky than National Refinery. It trades about 0.09 of its potential returns per unit of risk. National Refinery is currently generating about 0.03 per unit of risk. If you would invest 680.00 in Fauji Foods on September 12, 2024 and sell it today you would earn a total of 690.00 from holding Fauji Foods or generate 101.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fauji Foods vs. National Refinery
Performance |
| Timeline |
| Fauji Foods |
| National Refinery |
Fauji Foods and National Refinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fauji Foods and National Refinery
The main advantage of trading using opposite Fauji Foods and National Refinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fauji Foods position performs unexpectedly, National Refinery 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 National Refinery will offset losses from the drop in National Refinery's long position.| Fauji Foods vs. National Bank of | Fauji Foods vs. Engro Polymer Chemicals | Fauji Foods vs. ORIX Leasing Pakistan | Fauji Foods vs. Agritech |
| National Refinery vs. Unilever Pakistan Foods | National Refinery vs. Hi Tech Lubricants | National Refinery vs. Ghani Chemical Industries | National Refinery vs. WorldCall Telecom |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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