Correlation Between Murree Brewery and Fauji Fertilizer
Can any of the company-specific risk be diversified away by investing in both Murree Brewery 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 Murree Brewery and Fauji Fertilizer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Murree Brewery and Fauji Fertilizer, you can compare the effects of market volatilities on Murree Brewery 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 Murree Brewery with a short position of Fauji Fertilizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Murree Brewery and Fauji Fertilizer.
Diversification Opportunities for Murree Brewery and Fauji Fertilizer
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Murree and Fauji is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Murree Brewery and Fauji Fertilizer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fauji Fertilizer and Murree Brewery 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 Murree Brewery 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 Murree Brewery i.e., Murree Brewery and Fauji Fertilizer go up and down completely randomly.
Pair Corralation between Murree Brewery and Fauji Fertilizer
Assuming the 90 days trading horizon Murree Brewery is expected to generate 1.34 times less return on investment than Fauji Fertilizer. In addition to that, Murree Brewery is 1.18 times more volatile than Fauji Fertilizer. It trades about 0.14 of its total potential returns per unit of risk. Fauji Fertilizer is currently generating about 0.23 per unit of volatility. If you would invest 8,011 in Fauji Fertilizer on September 12, 2024 and sell it today you would earn a total of 26,869 from holding Fauji Fertilizer or generate 335.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.07% |
| Values | Daily Returns |
Murree Brewery vs. Fauji Fertilizer
Performance |
| Timeline |
| Murree Brewery |
| Fauji Fertilizer |
Murree Brewery and Fauji Fertilizer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Murree Brewery and Fauji Fertilizer
The main advantage of trading using opposite Murree Brewery and Fauji Fertilizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Murree Brewery 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.| Murree Brewery vs. Habib Insurance | Murree Brewery vs. Ghandhara Automobile | Murree Brewery vs. Century Insurance | Murree Brewery vs. Reliance Weaving Mills |
| 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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