Correlation Between Adamjee Insurance and Shifa International
Can any of the company-specific risk be diversified away by investing in both Adamjee Insurance and Shifa International 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 Shifa International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adamjee Insurance and Shifa International Hospitals, you can compare the effects of market volatilities on Adamjee Insurance and Shifa International 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 Shifa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adamjee Insurance and Shifa International.
Diversification Opportunities for Adamjee Insurance and Shifa International
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Adamjee and Shifa is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Adamjee Insurance and Shifa International Hospitals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shifa International 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 Shifa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shifa International has no effect on the direction of Adamjee Insurance i.e., Adamjee Insurance and Shifa International go up and down completely randomly.
Pair Corralation between Adamjee Insurance and Shifa International
Assuming the 90 days trading horizon Adamjee Insurance is expected to generate 2.0 times less return on investment than Shifa International. But when comparing it to its historical volatility, Adamjee Insurance is 1.28 times less risky than Shifa International. It trades about 0.08 of its potential returns per unit of risk. Shifa International Hospitals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 11,621 in Shifa International Hospitals on November 2, 2024 and sell it today you would earn a total of 31,779 from holding Shifa International Hospitals or generate 273.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.48% |
| Values | Daily Returns |
Adamjee Insurance vs. Shifa International Hospitals
Performance |
| Timeline |
| Adamjee Insurance |
| Shifa International |
Adamjee Insurance and Shifa International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adamjee Insurance and Shifa International
The main advantage of trading using opposite Adamjee Insurance and Shifa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adamjee Insurance position performs unexpectedly, Shifa International 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 Shifa International will offset losses from the drop in Shifa International's long position.| Adamjee Insurance vs. Pakistan Tobacco | Adamjee Insurance vs. Pakistan Aluminium Beverage | Adamjee Insurance vs. Ittehad Chemicals | Adamjee Insurance vs. Murree Brewery |
| Shifa International vs. Engro Polymer Chemicals | Shifa International vs. Nimir Industrial Chemical | Shifa International vs. Wah Nobel Chemicals | Shifa International vs. Air Link Communication |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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