Correlation Between EFU General and Tariq CorpPref

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

Diversification Opportunities for EFU General and Tariq CorpPref

-0.86

Correlation Coefficient

EFU General  Tariq CorpPref

Pay attention - limited upside

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

Pair Corralation between EFU General and Tariq CorpPref

Assuming the 90 days trading horizon EFU General Insurance is expected to generate 0.76 times more return on investment than Tariq CorpPref. However, EFU General Insurance is 1.32 times less risky than Tariq CorpPref. It trades about 0.12 of its potential returns per unit of risk. Tariq CorpPref is currently generating about -0.25 per unit of risk. If you would invest  9,310  in EFU General Insurance on September 27, 2024 and sell it today you would earn a total of  2,490  from holding EFU General Insurance or generate 26.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	57.81%
Values	Daily Returns

EFU General Insurance  vs.  Tariq CorpPref

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.

Tariq CorpPref

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tariq CorpPref has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with EFU General and Tariq CorpPref

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

The idea behind EFU General Insurance and Tariq CorpPref 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.

Check out your portfolio center.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.