Correlation Between Century Insurance and Pakistan International
Can any of the company-specific risk be diversified away by investing in both Century Insurance and Pakistan International 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 Pakistan International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Insurance and Pakistan International Bulk, you can compare the effects of market volatilities on Century Insurance and Pakistan International 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 Pakistan International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Insurance and Pakistan International.
Diversification Opportunities for Century Insurance and Pakistan International
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Century and Pakistan is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Century Insurance and Pakistan International Bulk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan International 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 Pakistan International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan International has no effect on the direction of Century Insurance i.e., Century Insurance and Pakistan International go up and down completely randomly.
Pair Corralation between Century Insurance and Pakistan International
Assuming the 90 days trading horizon Century Insurance is expected to generate 1.95 times less return on investment than Pakistan International. But when comparing it to its historical volatility, Century Insurance is 4.3 times less risky than Pakistan International. It trades about 0.06 of its potential returns per unit of risk. Pakistan International Bulk is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 852.00 in Pakistan International Bulk on October 9, 2024 and sell it today you would earn a total of 3.00 from holding Pakistan International Bulk or generate 0.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 90.0% |
| Values | Daily Returns |
Century Insurance vs. Pakistan International Bulk
Performance |
| Timeline |
| Century Insurance |
| Pakistan International |
Century Insurance and Pakistan International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Insurance and Pakistan International
The main advantage of trading using opposite Century Insurance and Pakistan International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Insurance position performs unexpectedly, Pakistan International 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 Pakistan International will offset losses from the drop in Pakistan International's long position.| Century Insurance vs. Air Link Communication | Century Insurance vs. Premier Insurance | Century Insurance vs. National Foods | Century Insurance vs. Universal Insurance |
| Pakistan International vs. Habib Insurance | Pakistan International vs. Ghandhara Automobile | Pakistan International vs. Shadab Textile Mills | Pakistan International vs. Century 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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