Correlation Between Grays Leasing and Fauji Foods

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

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

Diversification Opportunities for Grays Leasing and Fauji Foods

0.68

Correlation Coefficient

Grays Leasing  Fauji Foods

Poor diversification

The 3 months correlation between Grays and Fauji is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Grays Leasing and Fauji Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fauji Foods and Grays Leasing 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 Grays Leasing are associated (or correlated) with Fauji Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fauji Foods has no effect on the direction of Grays Leasing i.e., Grays Leasing and Fauji Foods go up and down completely randomly.

Pair Corralation between Grays Leasing and Fauji Foods

Assuming the 90 days trading horizon Grays Leasing is expected to under-perform the Fauji Foods. In addition to that, Grays Leasing is 1.63 times more volatile than Fauji Foods. It trades about -0.07 of its total potential returns per unit of risk. Fauji Foods is currently generating about -0.03 per unit of volatility. If you would invest  1,726  in Fauji Foods on December 30, 2024 and sell it today you would lose (112.00) from holding Fauji Foods or give up 6.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	87.3%
Values	Daily Returns

Grays Leasing  vs.  Fauji Foods

Grays Leasing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grays Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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.

Pair Trading with Grays Leasing and Fauji Foods

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

The idea behind Grays Leasing and Fauji Foods 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 Commodity Directory module to find actively traded commodities issued by global exchanges.