Correlation Between Oil and Fauji Cement
Can any of the company-specific risk be diversified away by investing in both Oil 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 Oil and Fauji Cement 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 Fauji Cement, you can compare the effects of market volatilities on Oil 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 Oil with a short position of Fauji Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil and Fauji Cement.
Diversification Opportunities for Oil and Fauji Cement
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Oil and Fauji is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Oil and Gas and Fauji Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fauji Cement 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 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 Oil i.e., Oil and Fauji Cement go up and down completely randomly.
Pair Corralation between Oil and Fauji Cement
Assuming the 90 days trading horizon Oil is expected to generate 1.08 times less return on investment than Fauji Cement. But when comparing it to its historical volatility, Oil and Gas is 1.55 times less risky than Fauji Cement. It trades about 0.13 of its potential returns per unit of risk. Fauji Cement is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,810 in Fauji Cement on December 4, 2024 and sell it today you would earn a total of 167.00 from holding Fauji Cement or generate 4.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oil and Gas vs. Fauji Cement
Performance |
| Timeline |
| Oil and Gas |
| Fauji Cement |
Oil and Fauji Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil and Fauji Cement
The main advantage of trading using opposite Oil and Fauji Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil 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.| Oil vs. TPL Insurance | Oil vs. Air Link Communication | Oil vs. Arpak International Investment | Oil vs. MCB Investment Manag |
| Fauji Cement vs. Engro Polymer Chemicals | Fauji Cement vs. Meezan Bank | Fauji Cement vs. ITTEFAQ Iron Industries | Fauji Cement vs. Agha Steel Industries |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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