Correlation Between IBL HealthCare and Century Insurance
Can any of the company-specific risk be diversified away by investing in both IBL HealthCare 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 IBL HealthCare and Century Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IBL HealthCare and Century Insurance, you can compare the effects of market volatilities on IBL HealthCare 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 IBL HealthCare with a short position of Century Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of IBL HealthCare and Century Insurance.
Diversification Opportunities for IBL HealthCare and Century Insurance
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IBL and Century is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding IBL HealthCare and Century Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Insurance and IBL HealthCare 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 IBL HealthCare 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 IBL HealthCare i.e., IBL HealthCare and Century Insurance go up and down completely randomly.
Pair Corralation between IBL HealthCare and Century Insurance
Assuming the 90 days trading horizon IBL HealthCare is expected to generate 3.43 times less return on investment than Century Insurance. But when comparing it to its historical volatility, IBL HealthCare is 1.38 times less risky than Century Insurance. It trades about 0.05 of its potential returns per unit of risk. Century Insurance is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,173 in Century Insurance on October 12, 2024 and sell it today you would earn a total of 2,677 from holding Century Insurance or generate 228.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 69.38% |
| Values | Daily Returns |
IBL HealthCare vs. Century Insurance
Performance |
| Timeline |
| IBL HealthCare |
| Century Insurance |
IBL HealthCare and Century Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IBL HealthCare and Century Insurance
The main advantage of trading using opposite IBL HealthCare and Century Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IBL HealthCare 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.| IBL HealthCare vs. Quice Food Industries | IBL HealthCare vs. Air Link Communication | IBL HealthCare vs. Packages | IBL HealthCare vs. Askari General Insurance |
| Century Insurance vs. Ittehad Chemicals | Century Insurance vs. Pakistan Hotel Developers | Century Insurance vs. Wah Nobel Chemicals | Century Insurance vs. IBL HealthCare |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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