Correlation Between Adamjee Insurance and Pakistan Tobacco
Can any of the company-specific risk be diversified away by investing in both Adamjee Insurance and Pakistan Tobacco 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 Adamjee Insurance and Pakistan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adamjee Insurance and Pakistan Tobacco, you can compare the effects of market volatilities on Adamjee Insurance and Pakistan Tobacco 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 Adamjee Insurance with a short position of Pakistan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adamjee Insurance and Pakistan Tobacco.
Diversification Opportunities for Adamjee Insurance and Pakistan Tobacco
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Adamjee and Pakistan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Adamjee Insurance and Pakistan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Tobacco and Adamjee 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 Adamjee Insurance are associated (or correlated) with Pakistan Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Tobacco has no effect on the direction of Adamjee Insurance i.e., Adamjee Insurance and Pakistan Tobacco go up and down completely randomly.
Pair Corralation between Adamjee Insurance and Pakistan Tobacco
Assuming the 90 days trading horizon Adamjee Insurance is expected to generate 1.49 times more return on investment than Pakistan Tobacco. However, Adamjee Insurance is 1.49 times more volatile than Pakistan Tobacco. It trades about 0.06 of its potential returns per unit of risk. Pakistan Tobacco is currently generating about -0.07 per unit of risk. If you would invest 3,954 in Adamjee Insurance on September 2, 2024 and sell it today you would earn a total of 101.00 from holding Adamjee Insurance or generate 2.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adamjee Insurance vs. Pakistan Tobacco
Performance |
| Timeline |
| Adamjee Insurance |
| Pakistan Tobacco |
Adamjee Insurance and Pakistan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adamjee Insurance and Pakistan Tobacco
The main advantage of trading using opposite Adamjee Insurance and Pakistan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adamjee Insurance position performs unexpectedly, Pakistan Tobacco 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 Pakistan Tobacco will offset losses from the drop in Pakistan Tobacco's long position.| Adamjee Insurance vs. Habib Bank | Adamjee Insurance vs. National Bank of | Adamjee Insurance vs. United Bank | Adamjee Insurance vs. MCB Bank |
| Pakistan Tobacco vs. Al Ghazi Tractors | Pakistan Tobacco vs. Shell Pakistan | Pakistan Tobacco vs. Pakistan State Oil | Pakistan Tobacco vs. Millat Tractors |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |