Correlation Between Maple Leaf and Fauji Cement
Can any of the company-specific risk be diversified away by investing in both Maple Leaf 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 Maple Leaf and Fauji Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Maple Leaf Cement and Fauji Cement, you can compare the effects of market volatilities on Maple Leaf 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 Maple Leaf with a short position of Fauji Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maple Leaf and Fauji Cement.
Diversification Opportunities for Maple Leaf and Fauji Cement
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Maple and Fauji is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Cement and Fauji Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fauji Cement and Maple Leaf 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 Maple Leaf Cement 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 Maple Leaf i.e., Maple Leaf and Fauji Cement go up and down completely randomly.
Pair Corralation between Maple Leaf and Fauji Cement
Assuming the 90 days trading horizon Maple Leaf Cement is expected to under-perform the Fauji Cement. But the stock apears to be less risky and, when comparing its historical volatility, Maple Leaf Cement is 1.03 times less risky than Fauji Cement. The stock trades about -0.12 of its potential returns per unit of risk. The Fauji Cement is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,707 in Fauji Cement on November 2, 2024 and sell it today you would earn a total of 79.00 from holding Fauji Cement or generate 2.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Maple Leaf Cement vs. Fauji Cement
Performance |
| Timeline |
| Maple Leaf Cement |
| Fauji Cement |
Maple Leaf and Fauji Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maple Leaf and Fauji Cement
The main advantage of trading using opposite Maple Leaf and Fauji Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maple Leaf 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.| Maple Leaf vs. Air Link Communication | Maple Leaf vs. Habib Insurance | Maple Leaf vs. Crescent Star Insurance | Maple Leaf vs. EFU General Insurance |
| Fauji Cement vs. ORIX Leasing Pakistan | Fauji Cement vs. Aisha Steel Mills | Fauji Cement vs. TPL Insurance | Fauji Cement vs. Metropolitan Steel Corp |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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