Correlation Between Century Insurance and Beco Steel
Can any of the company-specific risk be diversified away by investing in both Century Insurance and Beco Steel 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 Beco Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Insurance and Beco Steel, you can compare the effects of market volatilities on Century Insurance and Beco Steel 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 Beco Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Insurance and Beco Steel.
Diversification Opportunities for Century Insurance and Beco Steel
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Century and Beco is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Century Insurance and Beco Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beco Steel 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 Beco Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beco Steel has no effect on the direction of Century Insurance i.e., Century Insurance and Beco Steel go up and down completely randomly.
Pair Corralation between Century Insurance and Beco Steel
Assuming the 90 days trading horizon Century Insurance is expected to generate 0.58 times more return on investment than Beco Steel. However, Century Insurance is 1.74 times less risky than Beco Steel. It trades about 0.26 of its potential returns per unit of risk. Beco Steel is currently generating about -0.08 per unit of risk. If you would invest 3,050 in Century Insurance on August 24, 2024 and sell it today you would earn a total of 348.00 from holding Century Insurance or generate 11.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Century Insurance vs. Beco Steel
Performance |
| Timeline |
| Century Insurance |
| Beco Steel |
Century Insurance and Beco Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Insurance and Beco Steel
The main advantage of trading using opposite Century Insurance and Beco Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Insurance position performs unexpectedly, Beco Steel 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 Beco Steel will offset losses from the drop in Beco Steel's long position.| Century Insurance vs. Packages | Century Insurance vs. WorldCall Telecom | Century Insurance vs. Air Link Communication | Century Insurance vs. Nimir Industrial Chemical |
| Beco Steel vs. Mughal Iron Steel | Beco Steel vs. East West Insurance | Beco Steel vs. Honda Atlas Cars | Beco Steel vs. Sindh Modaraba Management |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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