Correlation Between Adamjee Insurance and United Insurance
Can any of the company-specific risk be diversified away by investing in both Adamjee Insurance and United Insurance 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 Insurance 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 Insurance, you can compare the effects of market volatilities on Adamjee Insurance and United Insurance 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 Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adamjee Insurance and United Insurance.
Diversification Opportunities for Adamjee Insurance and United Insurance
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Adamjee and United is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Adamjee Insurance and United Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Insurance 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 Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Insurance has no effect on the direction of Adamjee Insurance i.e., Adamjee Insurance and United Insurance go up and down completely randomly.
Pair Corralation between Adamjee Insurance and United Insurance
Assuming the 90 days trading horizon Adamjee Insurance is expected to generate 2.06 times more return on investment than United Insurance. However, Adamjee Insurance is 2.06 times more volatile than United Insurance. It trades about 0.1 of its potential returns per unit of risk. United Insurance is currently generating about -0.2 per unit of risk. If you would invest 3,908 in Adamjee Insurance on August 25, 2024 and sell it today you would earn a total of 210.00 from holding Adamjee Insurance or generate 5.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adamjee Insurance vs. United Insurance
Performance |
| Timeline |
| Adamjee Insurance |
| United Insurance |
Adamjee Insurance and United Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adamjee Insurance and United Insurance
The main advantage of trading using opposite Adamjee Insurance and United Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adamjee Insurance position performs unexpectedly, United Insurance 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 Insurance will offset losses from the drop in United Insurance's long position.| Adamjee Insurance vs. Security Investment Bank | Adamjee Insurance vs. MCB Investment Manag | Adamjee Insurance vs. 786 Investment Limited | Adamjee Insurance vs. Reliance Insurance Co |
| United Insurance vs. Bank of Punjab | United Insurance vs. JS Global Banking | United Insurance vs. Air Link Communication | United Insurance vs. Atlas Insurance |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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