Correlation Between EFU General and Loads

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

Diversification Opportunities for EFU General and Loads

0.86

Correlation Coefficient

EFU General  Loads

Very poor diversification

The 3 months correlation between EFU and Loads is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and Loads in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loads 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 Loads. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loads has no effect on the direction of EFU General i.e., EFU General and Loads go up and down completely randomly.

Pair Corralation between EFU General and Loads

Assuming the 90 days trading horizon EFU General Insurance is expected to generate 1.23 times more return on investment than Loads. However, EFU General is 1.23 times more volatile than Loads. It trades about 0.31 of its potential returns per unit of risk. Loads is currently generating about 0.2 per unit of risk. If you would invest  9,309  in EFU General Insurance on September 14, 2024 and sell it today you would earn a total of  2,992  from holding EFU General Insurance or generate 32.14% return on investment over 90 days.

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

EFU General Insurance  vs.  Loads

EFU General Insurance

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EFU General Insurance are ranked lower than 12 (%) 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.

Loads

Risk-Adjusted Performance

17 of 100

Solid

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

Pair Trading with EFU General and Loads

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

The idea behind EFU General Insurance and Loads 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.