Correlation Between Fauji Foods and Pakistan Aluminium
Can any of the company-specific risk be diversified away by investing in both Fauji Foods and Pakistan Aluminium 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 Pakistan Aluminium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fauji Foods and Pakistan Aluminium Beverage, you can compare the effects of market volatilities on Fauji Foods and Pakistan Aluminium 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 Pakistan Aluminium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fauji Foods and Pakistan Aluminium.
Diversification Opportunities for Fauji Foods and Pakistan Aluminium
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fauji and Pakistan is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Foods and Pakistan Aluminium Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Aluminium 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 Pakistan Aluminium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Aluminium has no effect on the direction of Fauji Foods i.e., Fauji Foods and Pakistan Aluminium go up and down completely randomly.
Pair Corralation between Fauji Foods and Pakistan Aluminium
Assuming the 90 days trading horizon Fauji Foods is expected to generate 1.38 times more return on investment than Pakistan Aluminium. However, Fauji Foods is 1.38 times more volatile than Pakistan Aluminium Beverage. It trades about -0.03 of its potential returns per unit of risk. Pakistan Aluminium Beverage is currently generating about -0.14 per unit of risk. If you would invest 1,726 in Fauji Foods on October 29, 2024 and sell it today you would lose (45.00) from holding Fauji Foods or give up 2.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fauji Foods vs. Pakistan Aluminium Beverage
Performance |
| Timeline |
| Fauji Foods |
| Pakistan Aluminium |
Fauji Foods and Pakistan Aluminium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fauji Foods and Pakistan Aluminium
The main advantage of trading using opposite Fauji Foods and Pakistan Aluminium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fauji Foods position performs unexpectedly, Pakistan Aluminium 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 Pakistan Aluminium will offset losses from the drop in Pakistan Aluminium's long position.| Fauji Foods vs. 786 Investment Limited | Fauji Foods vs. Fateh Sports Wear | Fauji Foods vs. International Steels | Fauji Foods vs. Crescent Steel Allied |
| Pakistan Aluminium vs. Habib Insurance | Pakistan Aluminium vs. Ghandhara Automobile | Pakistan Aluminium vs. Shadab Textile Mills | Pakistan Aluminium vs. Century 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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