Correlation Between Adamjee Insurance and United Bank
Can any of the company-specific risk be diversified away by investing in both Adamjee Insurance and United Bank 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 United Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adamjee Insurance and United Bank, you can compare the effects of market volatilities on Adamjee Insurance and United Bank 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 United Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adamjee Insurance and United Bank.
Diversification Opportunities for Adamjee Insurance and United Bank
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Adamjee and United is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Adamjee Insurance and United Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Bank 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 United Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Bank has no effect on the direction of Adamjee Insurance i.e., Adamjee Insurance and United Bank go up and down completely randomly.
Pair Corralation between Adamjee Insurance and United Bank
Assuming the 90 days trading horizon Adamjee Insurance is expected to under-perform the United Bank. In addition to that, Adamjee Insurance is 1.29 times more volatile than United Bank. It trades about -0.03 of its total potential returns per unit of risk. United Bank is currently generating about 0.08 per unit of volatility. If you would invest 37,515 in United Bank on October 7, 2024 and sell it today you would earn a total of 1,300 from holding United Bank or generate 3.47% 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. United Bank
Performance |
| Timeline |
| Adamjee Insurance |
| United Bank |
Adamjee Insurance and United Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adamjee Insurance and United Bank
The main advantage of trading using opposite Adamjee Insurance and United Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adamjee Insurance position performs unexpectedly, United Bank 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 United Bank will offset losses from the drop in United Bank's long position.| Adamjee Insurance vs. Reliance Insurance Co | Adamjee Insurance vs. Crescent Star Insurance | Adamjee Insurance vs. Pakistan Reinsurance | Adamjee Insurance vs. Synthetic Products Enterprises |
| United Bank vs. Pakistan Telecommunication | United Bank vs. Bank of Punjab | United Bank vs. Allied Bank | United Bank vs. Lotte Chemical Pakistan |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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