Correlation Between Habib Insurance and Fauji Fertilizer

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

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

Diversification Opportunities for Habib Insurance and Fauji Fertilizer

0.39

Correlation Coefficient

Habib Insurance  Fauji Fertilizer

Weak diversification

The 3 months correlation between Habib and Fauji is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Habib Insurance and Fauji Fertilizer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fauji Fertilizer and Habib Insurance 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 Habib Insurance are associated (or correlated) with Fauji Fertilizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fauji Fertilizer has no effect on the direction of Habib Insurance i.e., Habib Insurance and Fauji Fertilizer go up and down completely randomly.

Pair Corralation between Habib Insurance and Fauji Fertilizer

Assuming the 90 days trading horizon Habib Insurance is expected to generate 2.43 times more return on investment than Fauji Fertilizer. However, Habib Insurance is 2.43 times more volatile than Fauji Fertilizer. It trades about 0.07 of its potential returns per unit of risk. Fauji Fertilizer is currently generating about 0.07 per unit of risk. If you would invest  841.00  in Habib Insurance on December 30, 2024 and sell it today you would earn a total of  86.00  from holding Habib Insurance or generate 10.23% return on investment over 90 days.

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

Habib Insurance  vs.  Fauji Fertilizer

Habib Insurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Insurance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Habib Insurance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Fauji Fertilizer

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fauji Fertilizer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Fauji Fertilizer 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 Habib Insurance and Fauji Fertilizer

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

The idea behind Habib Insurance and Fauji Fertilizer 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.