Correlation Between Al Khair and Century Insurance
Can any of the company-specific risk be diversified away by investing in both Al Khair and Century 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 Al Khair and Century Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Al Khair Gadoon Limited and Century Insurance, you can compare the effects of market volatilities on Al Khair and Century 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 Al Khair with a short position of Century Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Al Khair and Century Insurance.
Diversification Opportunities for Al Khair and Century Insurance
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AKGL and Century is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Al Khair Gadoon Limited and Century Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Insurance and Al Khair 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 Al Khair Gadoon Limited are associated (or correlated) with Century Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Insurance has no effect on the direction of Al Khair i.e., Al Khair and Century Insurance go up and down completely randomly.
Pair Corralation between Al Khair and Century Insurance
Assuming the 90 days trading horizon Al Khair Gadoon Limited is expected to generate 1.46 times more return on investment than Century Insurance. However, Al Khair is 1.46 times more volatile than Century Insurance. It trades about 0.11 of its potential returns per unit of risk. Century Insurance is currently generating about 0.12 per unit of risk. If you would invest 2,687 in Al Khair Gadoon Limited on September 3, 2024 and sell it today you would earn a total of 1,063 from holding Al Khair Gadoon Limited or generate 39.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 23.0% |
| Values | Daily Returns |
Al Khair Gadoon Limited vs. Century Insurance
Performance |
| Timeline |
| Al Khair Gadoon |
| Century Insurance |
Al Khair and Century Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Al Khair and Century Insurance
The main advantage of trading using opposite Al Khair and Century Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Al Khair position performs unexpectedly, Century 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 Century Insurance will offset losses from the drop in Century Insurance's long position.| Al Khair vs. Habib Insurance | Al Khair vs. Pakistan Refinery | Al Khair vs. Century Insurance | Al Khair vs. Reliance Weaving Mills |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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