Correlation Between EFU General and First Fidelity

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

Diversification Opportunities for EFU General and First Fidelity

-0.35

Correlation Coefficient

EFU General  First Fidelity

Very good diversification

The 3 months correlation between EFU and First is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and First Fidelity Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Fidelity Leasing 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 First Fidelity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Fidelity Leasing has no effect on the direction of EFU General i.e., EFU General and First Fidelity go up and down completely randomly.

Pair Corralation between EFU General and First Fidelity

Assuming the 90 days trading horizon EFU General Insurance is expected to generate 0.71 times more return on investment than First Fidelity. However, EFU General Insurance is 1.41 times less risky than First Fidelity. It trades about 0.13 of its potential returns per unit of risk. First Fidelity Leasing is currently generating about -0.04 per unit of risk. If you would invest  10,830  in EFU General Insurance on December 21, 2024 and sell it today you would earn a total of  2,057  from holding EFU General Insurance or generate 18.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.8%
Values	Daily Returns

EFU General Insurance  vs.  First Fidelity Leasing

EFU General Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EFU General Insurance are ranked lower than 9 (%) 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.

First Fidelity Leasing

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Fidelity Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with EFU General and First Fidelity

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

The idea behind EFU General Insurance and First Fidelity Leasing 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..