Correlation Between EFU General and Data Agro

Can any of the company-specific risk be diversified away by investing in both EFU General and Data Agro 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 Data Agro 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 Data Agro, you can compare the effects of market volatilities on EFU General and Data Agro 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 Data Agro. Check out your portfolio center. Please also check ongoing floating volatility patterns of EFU General and Data Agro.

Diversification Opportunities for EFU General and Data Agro

0.26

Correlation Coefficient

EFU General  Data Agro

Modest diversification

The 3 months correlation between EFU and Data is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and Data Agro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data Agro 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 Data Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data Agro has no effect on the direction of EFU General i.e., EFU General and Data Agro go up and down completely randomly.

Pair Corralation between EFU General and Data Agro

Assuming the 90 days trading horizon EFU General is expected to generate 1.64 times less return on investment than Data Agro. But when comparing it to its historical volatility, EFU General Insurance is 1.33 times less risky than Data Agro. It trades about 0.15 of its potential returns per unit of risk. Data Agro is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  7,782  in Data Agro on October 12, 2024 and sell it today you would earn a total of  4,605  from holding Data Agro or generate 59.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

EFU General Insurance  vs.  Data Agro

EFU General Insurance

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EFU General Insurance are ranked lower than 11 (%) 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.

Data Agro

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Data Agro are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Data Agro sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EFU General and Data Agro

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

The idea behind EFU General Insurance and Data Agro 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.