Correlation Between Fauji Foods and Jubilee Life

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

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

Diversification Opportunities for Fauji Foods and Jubilee Life

0.15

Correlation Coefficient

Fauji Foods  Jubilee Life

Average diversification

The 3 months correlation between Fauji and Jubilee is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Foods and Jubilee Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jubilee Life 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 Jubilee Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jubilee Life Insurance has no effect on the direction of Fauji Foods i.e., Fauji Foods and Jubilee Life go up and down completely randomly.

Pair Corralation between Fauji Foods and Jubilee Life

Assuming the 90 days trading horizon Fauji Foods is expected to under-perform the Jubilee Life. But the stock apears to be less risky and, when comparing its historical volatility, Fauji Foods is 1.06 times less risky than Jubilee Life. The stock trades about -0.06 of its potential returns per unit of risk. The Jubilee Life Insurance is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  16,287  in Jubilee Life Insurance on December 31, 2024 and sell it today you would lose (1,436) from holding Jubilee Life Insurance or give up 8.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Fauji Foods  vs.  Jubilee Life 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 latest weak 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.

Jubilee Life Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jubilee Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Fauji Foods and Jubilee Life

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

The idea behind Fauji Foods and Jubilee Life 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.