Correlation Between EFU General and Century Insurance
Can any of the company-specific risk be diversified away by investing in both EFU General 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 EFU General and Century Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EFU General Insurance and Century Insurance, you can compare the effects of market volatilities on EFU General 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 EFU General with a short position of Century Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of EFU General and Century Insurance.
Diversification Opportunities for EFU General and Century Insurance
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between EFU and Century is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding EFU General Insurance and Century Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Insurance and EFU General 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 EFU General Insurance 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 EFU General i.e., EFU General and Century Insurance go up and down completely randomly.
Pair Corralation between EFU General and Century Insurance
Assuming the 90 days trading horizon EFU General Insurance is expected to generate 3.91 times more return on investment than Century Insurance. However, EFU General is 3.91 times more volatile than Century Insurance. It trades about 0.05 of its potential returns per unit of risk. Century Insurance is currently generating about 0.08 per unit of risk. If you would invest 11,601 in EFU General Insurance on November 4, 2024 and sell it today you would earn a total of 296.00 from holding EFU General Insurance or generate 2.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
EFU General Insurance vs. Century Insurance
Performance |
| Timeline |
| EFU General Insurance |
| Century Insurance |
EFU General and Century Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EFU General and Century Insurance
The main advantage of trading using opposite EFU General and Century Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EFU General 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.| EFU General vs. Pakistan Aluminium Beverage | EFU General vs. Quice Food Industries | EFU General vs. Fauji Foods | EFU General vs. Big Bird Foods |
| Century Insurance vs. East West Insurance | Century Insurance vs. Reliance Insurance Co | Century Insurance vs. Fauji Foods | Century Insurance vs. Ghandhara Automobile |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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