Correlation Between Adamjee Insurance and Sitara Chemical
Can any of the company-specific risk be diversified away by investing in both Adamjee Insurance and Sitara Chemical 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 Sitara Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adamjee Insurance and Sitara Chemical Industries, you can compare the effects of market volatilities on Adamjee Insurance and Sitara Chemical 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 Sitara Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adamjee Insurance and Sitara Chemical.
Diversification Opportunities for Adamjee Insurance and Sitara Chemical
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Adamjee and Sitara is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Adamjee Insurance and Sitara Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitara Chemical Indu 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 Sitara Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitara Chemical Indu has no effect on the direction of Adamjee Insurance i.e., Adamjee Insurance and Sitara Chemical go up and down completely randomly.
Pair Corralation between Adamjee Insurance and Sitara Chemical
Assuming the 90 days trading horizon Adamjee Insurance is expected to under-perform the Sitara Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Adamjee Insurance is 1.46 times less risky than Sitara Chemical. The stock trades about -0.24 of its potential returns per unit of risk. The Sitara Chemical Industries is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 32,300 in Sitara Chemical Industries on November 5, 2024 and sell it today you would lose (789.00) from holding Sitara Chemical Industries or give up 2.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Adamjee Insurance vs. Sitara Chemical Industries
Performance |
| Timeline |
| Adamjee Insurance |
| Sitara Chemical Indu |
Adamjee Insurance and Sitara Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adamjee Insurance and Sitara Chemical
The main advantage of trading using opposite Adamjee Insurance and Sitara Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adamjee Insurance position performs unexpectedly, Sitara Chemical 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 Sitara Chemical will offset losses from the drop in Sitara Chemical's long position.| Adamjee Insurance vs. National Bank of | Adamjee Insurance vs. Habib Insurance | Adamjee Insurance vs. Apna Microfinance Bank | Adamjee Insurance vs. Orient Rental Modaraba |
| Sitara Chemical vs. Pakistan Tobacco | Sitara Chemical vs. Data Agro | Sitara Chemical vs. Century Insurance | Sitara Chemical vs. Oil and Gas |
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 Channel module to use Commodity Channel Index to analyze current equity momentum.
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