Correlation Between KSB Pumps and Fauji Cement
Can any of the company-specific risk be diversified away by investing in both KSB Pumps and Fauji Cement 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 Fauji Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KSB Pumps and Fauji Cement, you can compare the effects of market volatilities on KSB Pumps and Fauji Cement 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 Fauji Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of KSB Pumps and Fauji Cement.
Diversification Opportunities for KSB Pumps and Fauji Cement
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KSB and Fauji is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding KSB Pumps and Fauji Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fauji Cement 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 Fauji Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fauji Cement has no effect on the direction of KSB Pumps i.e., KSB Pumps and Fauji Cement go up and down completely randomly.
Pair Corralation between KSB Pumps and Fauji Cement
Assuming the 90 days trading horizon KSB Pumps is expected to generate 0.94 times more return on investment than Fauji Cement. However, KSB Pumps is 1.07 times less risky than Fauji Cement. It trades about 0.1 of its potential returns per unit of risk. Fauji Cement is currently generating about -0.06 per unit of risk. If you would invest 14,922 in KSB Pumps on October 22, 2024 and sell it today you would earn a total of 609.00 from holding KSB Pumps or generate 4.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
KSB Pumps vs. Fauji Cement
Performance |
| Timeline |
| KSB Pumps |
| Fauji Cement |
KSB Pumps and Fauji Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KSB Pumps and Fauji Cement
The main advantage of trading using opposite KSB Pumps and Fauji Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KSB Pumps position performs unexpectedly, Fauji Cement 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 Fauji Cement will offset losses from the drop in Fauji Cement's long position.| KSB Pumps vs. Masood Textile Mills | KSB Pumps vs. Fauji Foods | KSB Pumps vs. Mari Petroleum | KSB Pumps vs. Loads |
| Fauji Cement vs. United Insurance | Fauji Cement vs. Wah Nobel Chemicals | Fauji Cement vs. Pakistan Telecommunication | Fauji Cement vs. Sitara Chemical Industries |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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