Correlation Between Nimir Industrial and EFU General

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

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

Diversification Opportunities for Nimir Industrial and EFU General

0.75

Correlation Coefficient

Nimir Industrial  EFU General

Poor diversification

The 3 months correlation between Nimir and EFU is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Nimir Industrial Chemical and EFU General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EFU General Insurance and Nimir Industrial 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 Nimir Industrial Chemical are associated (or correlated) with EFU General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EFU General Insurance has no effect on the direction of Nimir Industrial i.e., Nimir Industrial and EFU General go up and down completely randomly.

Pair Corralation between Nimir Industrial and EFU General

Assuming the 90 days trading horizon Nimir Industrial Chemical is expected to generate 1.09 times more return on investment than EFU General. However, Nimir Industrial is 1.09 times more volatile than EFU General Insurance. It trades about 0.08 of its potential returns per unit of risk. EFU General Insurance is currently generating about 0.05 per unit of risk. If you would invest  5,632  in Nimir Industrial Chemical on October 11, 2024 and sell it today you would earn a total of  8,068  from holding Nimir Industrial Chemical or generate 143.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	76.74%
Values	Daily Returns

Nimir Industrial Chemical  vs.  EFU General Insurance

Nimir Industrial Chemical

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nimir Industrial Chemical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Nimir Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

EFU General Insurance

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EFU General Insurance are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EFU General sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nimir Industrial and EFU General

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

The idea behind Nimir Industrial Chemical and EFU 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.