Correlation Between KSB Pumps and EFU General
Can any of the company-specific risk be diversified away by investing in both KSB Pumps 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 KSB Pumps and EFU General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KSB Pumps and EFU General Insurance, you can compare the effects of market volatilities on KSB Pumps 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 KSB Pumps with a short position of EFU General. Check out your portfolio center. Please also check ongoing floating volatility patterns of KSB Pumps and EFU General.
Diversification Opportunities for KSB Pumps and EFU General
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between KSB and EFU is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding KSB Pumps 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 KSB Pumps 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 KSB Pumps 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 KSB Pumps i.e., KSB Pumps and EFU General go up and down completely randomly.
Pair Corralation between KSB Pumps and EFU General
Assuming the 90 days trading horizon KSB Pumps is expected to generate 2.57 times less return on investment than EFU General. But when comparing it to its historical volatility, KSB Pumps is 1.32 times less risky than EFU General. It trades about 0.26 of its potential returns per unit of risk. EFU General Insurance is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest 8,888 in EFU General Insurance on September 2, 2024 and sell it today you would earn a total of 4,601 from holding EFU General Insurance or generate 51.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KSB Pumps vs. EFU General Insurance
Performance |
| Timeline |
| KSB Pumps |
| EFU General Insurance |
KSB Pumps and EFU General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KSB Pumps and EFU General
The main advantage of trading using opposite KSB Pumps and EFU General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KSB Pumps 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.| KSB Pumps vs. Oil and Gas | KSB Pumps vs. Security Investment Bank | KSB Pumps vs. Pakistan Tobacco | KSB Pumps vs. Agritech |
| EFU General vs. Habib Bank | EFU General vs. National Bank of | EFU General vs. United Bank | EFU General vs. MCB Bank |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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