Correlation Between National Foods and Crescent Star
Can any of the company-specific risk be diversified away by investing in both National Foods and Crescent Star 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 National Foods and Crescent Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Foods and Crescent Star Insurance, you can compare the effects of market volatilities on National Foods and Crescent Star 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 National Foods with a short position of Crescent Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Foods and Crescent Star.
Diversification Opportunities for National Foods and Crescent Star
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between National and Crescent is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding National Foods and Crescent Star Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Star Insurance and National Foods 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 National Foods are associated (or correlated) with Crescent Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Star Insurance has no effect on the direction of National Foods i.e., National Foods and Crescent Star go up and down completely randomly.
Pair Corralation between National Foods and Crescent Star
Assuming the 90 days trading horizon National Foods is expected to generate 3.74 times less return on investment than Crescent Star. But when comparing it to its historical volatility, National Foods is 1.89 times less risky than Crescent Star. It trades about 0.16 of its potential returns per unit of risk. Crescent Star Insurance is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 257.00 in Crescent Star Insurance on August 31, 2024 and sell it today you would earn a total of 61.00 from holding Crescent Star Insurance or generate 23.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Foods vs. Crescent Star Insurance
Performance |
| Timeline |
| National Foods |
| Crescent Star Insurance |
National Foods and Crescent Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Foods and Crescent Star
The main advantage of trading using opposite National Foods and Crescent Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Foods position performs unexpectedly, Crescent Star 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 Crescent Star will offset losses from the drop in Crescent Star's long position.| National Foods vs. Habib Insurance | National Foods vs. Shaheen Insurance | National Foods vs. Big Bird Foods | National Foods vs. Mughal Iron Steel |
| Crescent Star vs. Air Link Communication | Crescent Star vs. Century Insurance | Crescent Star vs. Atlas Insurance | Crescent Star vs. Security Investment 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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