Correlation Between EFU General and Askari General

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

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

Diversification Opportunities for EFU General and Askari General

0.69

Correlation Coefficient

EFU General  Askari General

Poor diversification

The 3 months correlation between EFU and Askari is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and Askari General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Askari General Insurance and EFU 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 EFU General Insurance are associated (or correlated) with Askari General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Askari General Insurance has no effect on the direction of EFU General i.e., EFU General and Askari General go up and down completely randomly.

Pair Corralation between EFU General and Askari General

Assuming the 90 days trading horizon EFU General is expected to generate 2.04 times less return on investment than Askari General. In addition to that, EFU General is 1.06 times more volatile than Askari General Insurance. It trades about 0.05 of its total potential returns per unit of risk. Askari General Insurance is currently generating about 0.12 per unit of volatility. If you would invest  996.00  in Askari General Insurance on October 11, 2024 and sell it today you would earn a total of  1,993  from holding Askari General Insurance or generate 200.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	82.09%
Values	Daily Returns

EFU General Insurance  vs.  Askari General Insurance

EFU General Insurance

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EFU General Insurance are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EFU General sustained solid returns over the last few months and may actually be approaching a breakup point.

Askari General Insurance

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Askari General Insurance are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Askari General sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EFU General and Askari General

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

The idea behind EFU General Insurance and Askari General Insurance 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.