Correlation Between Fauji Fertilizer and Avanceon

Can any of the company-specific risk be diversified away by investing in both Fauji Fertilizer and Avanceon 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 Fauji Fertilizer and Avanceon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fauji Fertilizer and Avanceon, you can compare the effects of market volatilities on Fauji Fertilizer and Avanceon 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 Fauji Fertilizer with a short position of Avanceon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fauji Fertilizer and Avanceon.

Diversification Opportunities for Fauji Fertilizer and Avanceon

0.1

Correlation Coefficient

Fauji Fertilizer  Avanceon

Average diversification

The 3 months correlation between Fauji and Avanceon is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Fertilizer and Avanceon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanceon and Fauji Fertilizer 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 Fauji Fertilizer are associated (or correlated) with Avanceon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanceon has no effect on the direction of Fauji Fertilizer i.e., Fauji Fertilizer and Avanceon go up and down completely randomly.

Pair Corralation between Fauji Fertilizer and Avanceon

Assuming the 90 days trading horizon Fauji Fertilizer is expected to generate 0.93 times more return on investment than Avanceon. However, Fauji Fertilizer is 1.07 times less risky than Avanceon. It trades about 0.13 of its potential returns per unit of risk. Avanceon is currently generating about -0.04 per unit of risk. If you would invest  33,655  in Fauji Fertilizer on December 4, 2024 and sell it today you would earn a total of  5,968  from holding Fauji Fertilizer or generate 17.73% return on investment over 90 days.

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

Fauji Fertilizer  vs.  Avanceon

Fauji Fertilizer

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fauji Fertilizer are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Fauji Fertilizer reported solid returns over the last few months and may actually be approaching a breakup point.

Avanceon

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avanceon has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Fauji Fertilizer and Avanceon

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

The idea behind Fauji Fertilizer and Avanceon 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.