Correlation Between KOT Addu and EFU General
Can any of the company-specific risk be diversified away by investing in both KOT Addu and EFU General 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 KOT Addu and EFU General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KOT Addu Power and EFU General Insurance, you can compare the effects of market volatilities on KOT Addu and EFU General 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 KOT Addu with a short position of EFU General. Check out your portfolio center. Please also check ongoing floating volatility patterns of KOT Addu and EFU General.
Diversification Opportunities for KOT Addu and EFU General
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between KOT and EFU is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding KOT Addu Power and EFU General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EFU General Insurance and KOT Addu 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 KOT Addu Power are associated (or correlated) with EFU General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EFU General Insurance has no effect on the direction of KOT Addu i.e., KOT Addu and EFU General go up and down completely randomly.
Pair Corralation between KOT Addu and EFU General
Assuming the 90 days trading horizon KOT Addu Power is expected to generate 0.74 times more return on investment than EFU General. However, KOT Addu Power is 1.35 times less risky than EFU General. It trades about 0.14 of its potential returns per unit of risk. EFU General Insurance is currently generating about 0.1 per unit of risk. If you would invest 1,370 in KOT Addu Power on September 1, 2024 and sell it today you would earn a total of 2,264 from holding KOT Addu Power or generate 165.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 70.44% |
| Values | Daily Returns |
KOT Addu Power vs. EFU General Insurance
Performance |
| Timeline |
| KOT Addu Power |
| EFU General Insurance |
KOT Addu and EFU General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KOT Addu and EFU General
The main advantage of trading using opposite KOT Addu and EFU General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KOT Addu position performs unexpectedly, EFU General 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 EFU General will offset losses from the drop in EFU General's long position.| KOT Addu vs. Oil and Gas | KOT Addu vs. Pakistan State Oil | KOT Addu vs. Pakistan Petroleum | KOT Addu vs. Fauji Fertilizer |
| EFU General vs. Reliance Insurance Co | EFU General vs. Mughal Iron Steel | EFU General vs. United Insurance | EFU General vs. Crescent Steel Allied |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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