Correlation Between KOT Addu and National Foods
Can any of the company-specific risk be diversified away by investing in both KOT Addu and National Foods 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 National Foods 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 National Foods, you can compare the effects of market volatilities on KOT Addu and National Foods 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 National Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of KOT Addu and National Foods.
Diversification Opportunities for KOT Addu and National Foods
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between KOT and National is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding KOT Addu Power and National Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Foods 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 National Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Foods has no effect on the direction of KOT Addu i.e., KOT Addu and National Foods go up and down completely randomly.
Pair Corralation between KOT Addu and National Foods
Assuming the 90 days trading horizon KOT Addu Power is expected to generate 1.77 times more return on investment than National Foods. However, KOT Addu is 1.77 times more volatile than National Foods. It trades about 0.31 of its potential returns per unit of risk. National Foods is currently generating about -0.02 per unit of risk. If you would invest 2,754 in KOT Addu Power on August 29, 2024 and sell it today you would earn a total of 531.00 from holding KOT Addu Power or generate 19.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KOT Addu Power vs. National Foods
Performance |
| Timeline |
| KOT Addu Power |
| National Foods |
KOT Addu and National Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KOT Addu and National Foods
The main advantage of trading using opposite KOT Addu and National Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KOT Addu position performs unexpectedly, National Foods 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 Foods will offset losses from the drop in National Foods' long position.| KOT Addu vs. Unity Foods | KOT Addu vs. National Foods | KOT Addu vs. Roshan Packages | KOT Addu vs. Crescent Steel Allied |
| National Foods vs. Matco Foods | National Foods vs. Pakistan Aluminium Beverage | National Foods vs. Crescent Star Insurance | National Foods vs. Unity 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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