Correlation Between Pak Gulf and EFU General
Can any of the company-specific risk be diversified away by investing in both Pak Gulf 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 Pak Gulf and EFU General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pak Gulf Leasing and EFU General Insurance, you can compare the effects of market volatilities on Pak Gulf 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 Pak Gulf with a short position of EFU General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pak Gulf and EFU General.
Diversification Opportunities for Pak Gulf and EFU General
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pak and EFU is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Pak Gulf Leasing 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 Pak Gulf 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 Pak Gulf Leasing 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 Pak Gulf i.e., Pak Gulf and EFU General go up and down completely randomly.
Pair Corralation between Pak Gulf and EFU General
Assuming the 90 days trading horizon Pak Gulf is expected to generate 1.83 times less return on investment than EFU General. In addition to that, Pak Gulf is 1.17 times more volatile than EFU General Insurance. It trades about 0.17 of its total potential returns per unit of risk. EFU General Insurance is currently generating about 0.37 per unit of volatility. If you would invest 8,855 in EFU General Insurance on August 27, 2024 and sell it today you would earn a total of 3,645 from holding EFU General Insurance or generate 41.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pak Gulf Leasing vs. EFU General Insurance
Performance |
| Timeline |
| Pak Gulf Leasing |
| EFU General Insurance |
Pak Gulf and EFU General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pak Gulf and EFU General
The main advantage of trading using opposite Pak Gulf and EFU General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pak Gulf 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.| Pak Gulf vs. Masood Textile Mills | Pak Gulf vs. Fauji Foods | Pak Gulf vs. KSB Pumps | Pak Gulf vs. Mari Petroleum |
| EFU General vs. Pakistan Aluminium Beverage | EFU General vs. Murree Brewery | EFU General vs. Sitara Chemical Industries | EFU General vs. Avanceon |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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