Correlation Between Fauji Foods and Loads

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

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

Diversification Opportunities for Fauji Foods and Loads

-0.67

Correlation Coefficient

Fauji Foods  Loads

Excellent diversification

The 3 months correlation between Fauji and Loads is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Fauji Foods and Loads in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loads 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 Loads. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loads has no effect on the direction of Fauji Foods i.e., Fauji Foods and Loads go up and down completely randomly.

Pair Corralation between Fauji Foods and Loads

Assuming the 90 days trading horizon Fauji Foods is expected to under-perform the Loads. But the stock apears to be less risky and, when comparing its historical volatility, Fauji Foods is 1.47 times less risky than Loads. The stock trades about -0.03 of its potential returns per unit of risk. The Loads is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,525  in Loads on December 30, 2024 and sell it today you would earn a total of  241.00  from holding Loads or generate 15.8% return on investment over 90 days.

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

Fauji Foods  vs.  Loads

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 latest stock price agitation, may contribute to short-term losses for the retail investors.

Loads

Risk-Adjusted Performance

Modest

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

Pair Trading with Fauji Foods and Loads

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

The idea behind Fauji Foods and Loads 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.