Correlation Between EFU General and Murree Brewery

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

Diversification Opportunities for EFU General and Murree Brewery

0.82

Correlation Coefficient

EFU General  Murree Brewery

Very poor diversification

The 3 months correlation between EFU and Murree is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and Murree Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murree Brewery 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 Murree Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murree Brewery has no effect on the direction of EFU General i.e., EFU General and Murree Brewery go up and down completely randomly.

Pair Corralation between EFU General and Murree Brewery

Assuming the 90 days trading horizon EFU General is expected to generate 1.65 times less return on investment than Murree Brewery. In addition to that, EFU General is 1.18 times more volatile than Murree Brewery. It trades about 0.05 of its total potential returns per unit of risk. Murree Brewery is currently generating about 0.11 per unit of volatility. If you would invest  30,012  in Murree Brewery on October 11, 2024 and sell it today you would earn a total of  50,347  from holding Murree Brewery or generate 167.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	74.1%
Values	Daily Returns

EFU General Insurance  vs.  Murree Brewery

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 conflicting basic indicators, EFU General sustained solid returns over the last few months and may actually be approaching a breakup point.

Murree Brewery

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Murree Brewery are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Murree Brewery disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EFU General and Murree Brewery

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

The idea behind EFU General Insurance and Murree Brewery 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..