Correlation Between National Bank and Fauji Cement
Can any of the company-specific risk be diversified away by investing in both National Bank 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 National Bank and Fauji Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Bank of and Fauji Cement, you can compare the effects of market volatilities on National Bank 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 National Bank with a short position of Fauji Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Fauji Cement.
Diversification Opportunities for National Bank and Fauji Cement
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Fauji is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Fauji Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fauji Cement and National Bank 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 Bank of 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 National Bank i.e., National Bank and Fauji Cement go up and down completely randomly.
Pair Corralation between National Bank and Fauji Cement
Assuming the 90 days trading horizon National Bank of is expected to generate 1.08 times more return on investment than Fauji Cement. However, National Bank is 1.08 times more volatile than Fauji Cement. It trades about 0.13 of its potential returns per unit of risk. Fauji Cement is currently generating about 0.14 per unit of risk. If you would invest 3,351 in National Bank of on September 14, 2024 and sell it today you would earn a total of 4,131 from holding National Bank of or generate 123.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Bank of vs. Fauji Cement
Performance |
| Timeline |
| National Bank |
| Fauji Cement |
National Bank and Fauji Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and Fauji Cement
The main advantage of trading using opposite National Bank and Fauji Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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.| National Bank vs. Masood Textile Mills | National Bank vs. Fauji Foods | National Bank vs. KSB Pumps | National Bank vs. Mari Petroleum |
| Fauji Cement vs. Oil and Gas | Fauji Cement vs. Pakistan State Oil | Fauji Cement vs. Pakistan Petroleum | Fauji Cement vs. Fauji Fertilizer |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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