Correlation Between Century Insurance and Reliance Insurance
Can any of the company-specific risk be diversified away by investing in both Century Insurance and Reliance 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 Century Insurance and Reliance Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Insurance and Reliance Insurance Co, you can compare the effects of market volatilities on Century Insurance and Reliance 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 Century Insurance with a short position of Reliance Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Insurance and Reliance Insurance.
Diversification Opportunities for Century Insurance and Reliance Insurance
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Century and Reliance is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Century Insurance and Reliance Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Insurance 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 Reliance Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Insurance has no effect on the direction of Century Insurance i.e., Century Insurance and Reliance Insurance go up and down completely randomly.
Pair Corralation between Century Insurance and Reliance Insurance
Assuming the 90 days trading horizon Century Insurance is expected to generate 0.5 times more return on investment than Reliance Insurance. However, Century Insurance is 2.02 times less risky than Reliance Insurance. It trades about 0.21 of its potential returns per unit of risk. Reliance Insurance Co is currently generating about 0.06 per unit of risk. If you would invest 3,100 in Century Insurance on October 25, 2024 and sell it today you would earn a total of 750.00 from holding Century Insurance or generate 24.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Century Insurance vs. Reliance Insurance Co
Performance |
| Timeline |
| Century Insurance |
| Reliance Insurance |
Century Insurance and Reliance Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Insurance and Reliance Insurance
The main advantage of trading using opposite Century Insurance and Reliance Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Insurance position performs unexpectedly, Reliance 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 Reliance Insurance will offset losses from the drop in Reliance Insurance's long position.| Century Insurance vs. Lotte Chemical Pakistan | Century Insurance vs. Metropolitan Steel Corp | Century Insurance vs. Engro Polymer Chemicals | Century Insurance vs. ORIX Leasing Pakistan |
| Reliance Insurance vs. Beco Steel | Reliance Insurance vs. Unity Foods | Reliance Insurance vs. Pakistan Telecommunication | Reliance Insurance vs. National Foods |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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