Correlation Between Fauji Foods and Treet
Can any of the company-specific risk be diversified away by investing in both Fauji Foods and Treet 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 Treet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fauji Foods and Treet, you can compare the effects of market volatilities on Fauji Foods and Treet 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 Treet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fauji Foods and Treet.
Diversification Opportunities for Fauji Foods and Treet
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fauji and Treet is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Foods and Treet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treet 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 Treet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treet has no effect on the direction of Fauji Foods i.e., Fauji Foods and Treet go up and down completely randomly.
Pair Corralation between Fauji Foods and Treet
Assuming the 90 days trading horizon Fauji Foods is expected to generate 0.88 times more return on investment than Treet. However, Fauji Foods is 1.14 times less risky than Treet. It trades about 0.25 of its potential returns per unit of risk. Treet is currently generating about 0.22 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 215.00 from holding Fauji Foods or generate 20.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fauji Foods vs. Treet
Performance |
| Timeline |
| Fauji Foods |
| Treet |
Fauji Foods and Treet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fauji Foods and Treet
The main advantage of trading using opposite Fauji Foods and Treet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fauji Foods position performs unexpectedly, Treet 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 Treet will offset losses from the drop in Treet's long position.| Fauji Foods vs. Pakistan Telecommunication | Fauji Foods vs. Grays Leasing | Fauji Foods vs. National Foods | Fauji Foods vs. Sitara Chemical Industries |
| Treet vs. Big Bird Foods | Treet vs. Jubilee Life Insurance | Treet vs. TPL Insurance | Treet vs. Matco Foods |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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