Correlation Between Askari General and Fauji Foods

Can any of the company-specific risk be diversified away by investing in both Askari General and Fauji Foods 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 Askari General and Fauji Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Askari General Insurance and Fauji Foods, you can compare the effects of market volatilities on Askari General and Fauji Foods 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 Askari General with a short position of Fauji Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Askari General and Fauji Foods.

Diversification Opportunities for Askari General and Fauji Foods

-0.03

Correlation Coefficient

Askari General  Fauji Foods

Good diversification

The 3 months correlation between Askari and Fauji is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Askari General Insurance and Fauji Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fauji Foods and Askari General 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 Askari General Insurance are associated (or correlated) with Fauji Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fauji Foods has no effect on the direction of Askari General i.e., Askari General and Fauji Foods go up and down completely randomly.

Pair Corralation between Askari General and Fauji Foods

Assuming the 90 days trading horizon Askari General Insurance is expected to generate 0.87 times more return on investment than Fauji Foods. However, Askari General Insurance is 1.15 times less risky than Fauji Foods. It trades about 0.1 of its potential returns per unit of risk. Fauji Foods is currently generating about 0.08 per unit of risk. If you would invest  2,816  in Askari General Insurance on December 21, 2024 and sell it today you would earn a total of  367.00  from holding Askari General Insurance or generate 13.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Askari General Insurance  vs.  Fauji Foods

Askari General Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Askari General Insurance are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Askari General sustained solid returns over the last few months and may actually be approaching a breakup point.

Fauji Foods

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fauji Foods are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Fauji Foods reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Askari General and Fauji Foods

The main advantage of trading using opposite Askari General and Fauji Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Askari General position performs unexpectedly, Fauji Foods 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 Foods will offset losses from the drop in Fauji Foods' long position.

The idea behind Askari General Insurance and Fauji Foods 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.

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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.