Correlation Between EFU General and Fateh Sports

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

Diversification Opportunities for EFU General and Fateh Sports

0.17

Correlation Coefficient

EFU General  Fateh Sports

Average diversification

The 3 months correlation between EFU and Fateh is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and Fateh Sports Wear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fateh Sports Wear 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 Fateh Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fateh Sports Wear has no effect on the direction of EFU General i.e., EFU General and Fateh Sports go up and down completely randomly.

Pair Corralation between EFU General and Fateh Sports

Assuming the 90 days trading horizon EFU General Insurance is expected to generate 1.13 times more return on investment than Fateh Sports. However, EFU General is 1.13 times more volatile than Fateh Sports Wear. It trades about -0.08 of its potential returns per unit of risk. Fateh Sports Wear is currently generating about -0.27 per unit of risk. If you would invest  11,800  in EFU General Insurance on October 26, 2024 and sell it today you would lose (662.00) from holding EFU General Insurance or give up 5.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	70.0%
Values	Daily Returns

EFU General Insurance  vs.  Fateh Sports Wear

EFU General Insurance

Risk-Adjusted Performance

9 of 100

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.

Fateh Sports Wear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fateh Sports Wear has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with EFU General and Fateh Sports

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

The idea behind EFU General Insurance and Fateh Sports Wear 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.