Correlation Between Oil and EFU General
Can any of the company-specific risk be diversified away by investing in both Oil 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 Oil and EFU General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oil and Gas and EFU General Insurance, you can compare the effects of market volatilities on Oil 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 Oil with a short position of EFU General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil and EFU General.
Diversification Opportunities for Oil and EFU General
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Oil and EFU is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Oil and Gas 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 Oil 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 Oil and Gas 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 Oil i.e., Oil and EFU General go up and down completely randomly.
Pair Corralation between Oil and EFU General
Assuming the 90 days trading horizon Oil and Gas is expected to under-perform the EFU General. But the stock apears to be less risky and, when comparing its historical volatility, Oil and Gas is 1.65 times less risky than EFU General. The stock trades about -0.17 of its potential returns per unit of risk. The EFU General Insurance is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 11,601 in EFU General Insurance on November 3, 2024 and sell it today you would earn a total of 296.00 from holding EFU General Insurance or generate 2.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oil and Gas vs. EFU General Insurance
Performance |
| Timeline |
| Oil and Gas |
| EFU General Insurance |
Oil and EFU General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil and EFU General
The main advantage of trading using opposite Oil and EFU General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil 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.The idea behind Oil and Gas and EFU General Insurance pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| EFU General vs. Mughal Iron Steel | EFU General vs. Pakistan Telecommunication | EFU General vs. 786 Investment Limited | EFU General vs. Oil and Gas |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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