Correlation Between Quice Food and KSB Pumps
Can any of the company-specific risk be diversified away by investing in both Quice Food and KSB Pumps 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 Quice Food and KSB Pumps into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Quice Food Industries and KSB Pumps, you can compare the effects of market volatilities on Quice Food and KSB Pumps 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 Quice Food with a short position of KSB Pumps. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quice Food and KSB Pumps.
Diversification Opportunities for Quice Food and KSB Pumps
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Quice and KSB is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Quice Food Industries and KSB Pumps in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KSB Pumps and Quice Food 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 Quice Food Industries are associated (or correlated) with KSB Pumps. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KSB Pumps has no effect on the direction of Quice Food i.e., Quice Food and KSB Pumps go up and down completely randomly.
Pair Corralation between Quice Food and KSB Pumps
Assuming the 90 days trading horizon Quice Food Industries is expected to generate 2.12 times more return on investment than KSB Pumps. However, Quice Food is 2.12 times more volatile than KSB Pumps. It trades about -0.04 of its potential returns per unit of risk. KSB Pumps is currently generating about -0.19 per unit of risk. If you would invest 664.00 in Quice Food Industries on November 4, 2024 and sell it today you would lose (33.00) from holding Quice Food Industries or give up 4.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Quice Food Industries vs. KSB Pumps
Performance |
| Timeline |
| Quice Food Industries |
| KSB Pumps |
Quice Food and KSB Pumps Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Quice Food and KSB Pumps
The main advantage of trading using opposite Quice Food and KSB Pumps positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quice Food position performs unexpectedly, KSB Pumps 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 KSB Pumps will offset losses from the drop in KSB Pumps' long position.| Quice Food vs. JS Investments | Quice Food vs. MCB Bank | Quice Food vs. Jubilee Life Insurance | Quice Food vs. MCB Investment Manag |
| KSB Pumps vs. Pakistan Aluminium Beverage | KSB Pumps vs. Habib Insurance | KSB Pumps vs. Jubilee Life Insurance | KSB Pumps vs. United Insurance |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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