Correlation Between United Bank and Fauji Fertilizer
Can any of the company-specific risk be diversified away by investing in both United Bank and Fauji Fertilizer 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 United Bank and Fauji Fertilizer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Bank and Fauji Fertilizer, you can compare the effects of market volatilities on United Bank and Fauji Fertilizer 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 United Bank with a short position of Fauji Fertilizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Bank and Fauji Fertilizer.
Diversification Opportunities for United Bank and Fauji Fertilizer
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between United and Fauji is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding United Bank and Fauji Fertilizer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fauji Fertilizer and United 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 United Bank are associated (or correlated) with Fauji Fertilizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fauji Fertilizer has no effect on the direction of United Bank i.e., United Bank and Fauji Fertilizer go up and down completely randomly.
Pair Corralation between United Bank and Fauji Fertilizer
Assuming the 90 days trading horizon United Bank is expected to generate 1.83 times less return on investment than Fauji Fertilizer. But when comparing it to its historical volatility, United Bank is 1.47 times less risky than Fauji Fertilizer. It trades about 0.24 of its potential returns per unit of risk. Fauji Fertilizer is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 13,221 in Fauji Fertilizer on August 30, 2024 and sell it today you would earn a total of 19,346 from holding Fauji Fertilizer or generate 146.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Bank vs. Fauji Fertilizer
Performance |
| Timeline |
| United Bank |
| Fauji Fertilizer |
United Bank and Fauji Fertilizer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Bank and Fauji Fertilizer
The main advantage of trading using opposite United Bank and Fauji Fertilizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Bank position performs unexpectedly, Fauji Fertilizer 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 Fertilizer will offset losses from the drop in Fauji Fertilizer's long position.| United Bank vs. Shaheen Insurance | United Bank vs. Unity Foods | United Bank vs. TPL Insurance | United Bank vs. AKD Hospitality |
| Fauji Fertilizer vs. Pakistan Telecommunication | Fauji Fertilizer vs. WorldCall Telecom | Fauji Fertilizer vs. Roshan Packages | Fauji Fertilizer vs. Big Bird Foods |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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