Correlation Between Fauji Foods and Askari General

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

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

Diversification Opportunities for Fauji Foods and Askari General

-0.42

Correlation Coefficient

Fauji Foods  Askari General

Very good diversification

The 3 months correlation between Fauji and Askari is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Foods and Askari General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Askari General Insurance and Fauji Foods 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 Foods are associated (or correlated) with Askari General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Askari General Insurance has no effect on the direction of Fauji Foods i.e., Fauji Foods and Askari General go up and down completely randomly.

Pair Corralation between Fauji Foods and Askari General

Assuming the 90 days trading horizon Fauji Foods is expected to under-perform the Askari General. In addition to that, Fauji Foods is 1.01 times more volatile than Askari General Insurance. It trades about -0.04 of its total potential returns per unit of risk. Askari General Insurance is currently generating about 0.09 per unit of volatility. If you would invest  2,848  in Askari General Insurance on December 28, 2024 and sell it today you would earn a total of  323.00  from holding Askari General Insurance or generate 11.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Fauji Foods  vs.  Askari General Insurance

Fauji Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fauji Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Fauji Foods is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Askari General Insurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Askari General Insurance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Askari General sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fauji Foods and Askari General

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

The idea behind Fauji Foods and Askari General Insurance 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.