Correlation Between Fauji Foods and TPL Insurance
Can any of the company-specific risk be diversified away by investing in both Fauji Foods and TPL Insurance 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 TPL Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fauji Foods and TPL Insurance, you can compare the effects of market volatilities on Fauji Foods and TPL Insurance 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 TPL Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fauji Foods and TPL Insurance.
Diversification Opportunities for Fauji Foods and TPL Insurance
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fauji and TPL is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Foods and TPL Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPL Insurance 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 TPL Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPL Insurance has no effect on the direction of Fauji Foods i.e., Fauji Foods and TPL Insurance go up and down completely randomly.
Pair Corralation between Fauji Foods and TPL Insurance
Assuming the 90 days trading horizon Fauji Foods is expected to generate 0.96 times more return on investment than TPL Insurance. However, Fauji Foods is 1.04 times less risky than TPL Insurance. It trades about 0.09 of its potential returns per unit of risk. TPL Insurance is currently generating about -0.04 per unit of risk. If you would invest 533.00 in Fauji Foods on August 24, 2024 and sell it today you would earn a total of 641.00 from holding Fauji Foods or generate 120.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.51% |
| Values | Daily Returns |
Fauji Foods vs. TPL Insurance
Performance |
| Timeline |
| Fauji Foods |
| TPL Insurance |
Fauji Foods and TPL Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fauji Foods and TPL Insurance
The main advantage of trading using opposite Fauji Foods and TPL Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fauji Foods position performs unexpectedly, TPL Insurance 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 TPL Insurance will offset losses from the drop in TPL Insurance's long position.| Fauji Foods vs. Askari General Insurance | Fauji Foods vs. East West Insurance | Fauji Foods vs. Atlas Insurance | Fauji Foods vs. Century Insurance |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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