Correlation Between Century Insurance and Bank Alfalah
Can any of the company-specific risk be diversified away by investing in both Century Insurance and Bank Alfalah 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 Century Insurance and Bank Alfalah into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Insurance and Bank Alfalah, you can compare the effects of market volatilities on Century Insurance and Bank Alfalah 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 Century Insurance with a short position of Bank Alfalah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Insurance and Bank Alfalah.
Diversification Opportunities for Century Insurance and Bank Alfalah
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Century and Bank is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Century Insurance and Bank Alfalah in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Alfalah and Century 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 Century Insurance are associated (or correlated) with Bank Alfalah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Alfalah has no effect on the direction of Century Insurance i.e., Century Insurance and Bank Alfalah go up and down completely randomly.
Pair Corralation between Century Insurance and Bank Alfalah
Assuming the 90 days trading horizon Century Insurance is expected to generate 1.76 times more return on investment than Bank Alfalah. However, Century Insurance is 1.76 times more volatile than Bank Alfalah. It trades about 0.12 of its potential returns per unit of risk. Bank Alfalah is currently generating about 0.14 per unit of risk. If you would invest 1,892 in Century Insurance on September 3, 2024 and sell it today you would earn a total of 1,905 from holding Century Insurance or generate 100.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 80.0% |
| Values | Daily Returns |
Century Insurance vs. Bank Alfalah
Performance |
| Timeline |
| Century Insurance |
| Bank Alfalah |
Century Insurance and Bank Alfalah Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Insurance and Bank Alfalah
The main advantage of trading using opposite Century Insurance and Bank Alfalah positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Insurance position performs unexpectedly, Bank Alfalah 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 Bank Alfalah will offset losses from the drop in Bank Alfalah's long position.| Century Insurance vs. Oil and Gas | Century Insurance vs. Pakistan State Oil | Century Insurance vs. Pakistan Petroleum | Century Insurance vs. Fauji Fertilizer |
| Bank Alfalah vs. Reliance Insurance Co | Bank Alfalah vs. Air Link Communication | Bank Alfalah vs. Century Insurance | Bank Alfalah vs. Habib 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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