Correlation Between East West and KOT Addu
Can any of the company-specific risk be diversified away by investing in both East West and KOT Addu 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 East West and KOT Addu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East West Insurance and KOT Addu Power, you can compare the effects of market volatilities on East West and KOT Addu 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 East West with a short position of KOT Addu. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and KOT Addu.
Diversification Opportunities for East West and KOT Addu
Very good diversification
The 3 months correlation between East and KOT is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding East West Insurance and KOT Addu Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KOT Addu Power and East West 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 East West Insurance are associated (or correlated) with KOT Addu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KOT Addu Power has no effect on the direction of East West i.e., East West and KOT Addu go up and down completely randomly.
Pair Corralation between East West and KOT Addu
Assuming the 90 days trading horizon East West Insurance is expected to under-perform the KOT Addu. In addition to that, East West is 1.59 times more volatile than KOT Addu Power. It trades about -0.16 of its total potential returns per unit of risk. KOT Addu Power is currently generating about 0.13 per unit of volatility. If you would invest 2,729 in KOT Addu Power on September 2, 2024 and sell it today you would earn a total of 905.00 from holding KOT Addu Power or generate 33.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 44.72% |
| Values | Daily Returns |
East West Insurance vs. KOT Addu Power
Performance |
| Timeline |
| East West Insurance |
| KOT Addu Power |
East West and KOT Addu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and KOT Addu
The main advantage of trading using opposite East West and KOT Addu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, KOT Addu 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 KOT Addu will offset losses from the drop in KOT Addu's long position.| East West vs. Habib Insurance | East West vs. Century Insurance | East West vs. Reliance Weaving Mills | East West vs. Media Times |
| KOT Addu vs. Habib Insurance | KOT Addu vs. Adamjee Insurance | KOT Addu vs. Shifa International Hospitals | KOT Addu vs. Unilever Pakistan 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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