Correlation Between National Foods and EFU General
Can any of the company-specific risk be diversified away by investing in both National Foods and EFU General 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 EFU General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Foods and EFU General Insurance, you can compare the effects of market volatilities on National Foods and EFU General 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 EFU General. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Foods and EFU General.
Diversification Opportunities for National Foods and EFU General
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between National and EFU is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding National Foods and EFU General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EFU General 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 EFU General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EFU General Insurance has no effect on the direction of National Foods i.e., National Foods and EFU General go up and down completely randomly.
Pair Corralation between National Foods and EFU General
Assuming the 90 days trading horizon National Foods is expected to under-perform the EFU General. But the stock apears to be less risky and, when comparing its historical volatility, National Foods is 3.1 times less risky than EFU General. The stock trades about -0.02 of its potential returns per unit of risk. The EFU General Insurance is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 8,855 in EFU General Insurance on August 28, 2024 and sell it today you would earn a total of 4,191 from holding EFU General Insurance or generate 47.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Foods vs. EFU General Insurance
Performance |
| Timeline |
| National Foods |
| EFU General Insurance |
National Foods and EFU General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Foods and EFU General
The main advantage of trading using opposite National Foods and EFU General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Foods position performs unexpectedly, EFU General 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 EFU General will offset losses from the drop in EFU General's long position.| National Foods vs. Matco Foods | National Foods vs. Pakistan Aluminium Beverage | National Foods vs. Crescent Star Insurance | National Foods vs. Unity Foods |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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