Correlation Between KSB Pumps and Fauji Fertilizer
Can any of the company-specific risk be diversified away by investing in both KSB Pumps and Fauji Fertilizer 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 Fertilizer 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 Fertilizer, you can compare the effects of market volatilities on KSB Pumps and Fauji Fertilizer 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 Fertilizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of KSB Pumps and Fauji Fertilizer.
Diversification Opportunities for KSB Pumps and Fauji Fertilizer
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between KSB and Fauji is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding KSB Pumps and Fauji Fertilizer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fauji Fertilizer 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 Fertilizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fauji Fertilizer has no effect on the direction of KSB Pumps i.e., KSB Pumps and Fauji Fertilizer go up and down completely randomly.
Pair Corralation between KSB Pumps and Fauji Fertilizer
Assuming the 90 days trading horizon KSB Pumps is expected to generate 3.87 times less return on investment than Fauji Fertilizer. In addition to that, KSB Pumps is 1.36 times more volatile than Fauji Fertilizer. It trades about 0.06 of its total potential returns per unit of risk. Fauji Fertilizer is currently generating about 0.3 per unit of volatility. If you would invest 9,957 in Fauji Fertilizer on August 25, 2024 and sell it today you would earn a total of 22,276 from holding Fauji Fertilizer or generate 223.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.9% |
| Values | Daily Returns |
KSB Pumps vs. Fauji Fertilizer
Performance |
| Timeline |
| KSB Pumps |
| Fauji Fertilizer |
KSB Pumps and Fauji Fertilizer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KSB Pumps and Fauji Fertilizer
The main advantage of trading using opposite KSB Pumps and Fauji Fertilizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KSB Pumps position performs unexpectedly, Fauji Fertilizer 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 Fertilizer will offset losses from the drop in Fauji Fertilizer's long position.| KSB Pumps vs. Security Investment Bank | KSB Pumps vs. Data Agro | KSB Pumps vs. 786 Investment Limited | KSB Pumps vs. Adamjee Insurance |
| Fauji Fertilizer vs. Masood Textile Mills | Fauji Fertilizer vs. Fauji Foods | Fauji Fertilizer vs. KSB Pumps | Fauji Fertilizer vs. Mari Petroleum |
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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