Correlation Between National Foods and Shell Pakistan
Can any of the company-specific risk be diversified away by investing in both National Foods and Shell Pakistan 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 Shell Pakistan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Foods and Shell Pakistan, you can compare the effects of market volatilities on National Foods and Shell Pakistan 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 Shell Pakistan. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Foods and Shell Pakistan.
Diversification Opportunities for National Foods and Shell Pakistan
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between National and Shell is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding National Foods and Shell Pakistan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell Pakistan 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 Shell Pakistan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shell Pakistan has no effect on the direction of National Foods i.e., National Foods and Shell Pakistan go up and down completely randomly.
Pair Corralation between National Foods and Shell Pakistan
Assuming the 90 days trading horizon National Foods is expected to generate 2.77 times less return on investment than Shell Pakistan. But when comparing it to its historical volatility, National Foods is 1.09 times less risky than Shell Pakistan. It trades about 0.17 of its potential returns per unit of risk. Shell Pakistan is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 14,429 in Shell Pakistan on September 4, 2024 and sell it today you would earn a total of 2,776 from holding Shell Pakistan or generate 19.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Foods vs. Shell Pakistan
Performance |
| Timeline |
| National Foods |
| Shell Pakistan |
National Foods and Shell Pakistan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Foods and Shell Pakistan
The main advantage of trading using opposite National Foods and Shell Pakistan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Foods position performs unexpectedly, Shell Pakistan 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 Shell Pakistan will offset losses from the drop in Shell Pakistan's long position.| National Foods vs. Habib Bank | National Foods vs. National Bank of | National Foods vs. United Bank | National Foods vs. MCB Bank |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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