Correlation Between Ittehad Chemicals and Century Insurance

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Can any of the company-specific risk be diversified away by investing in both Ittehad Chemicals 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 Ittehad Chemicals and Century Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ittehad Chemicals and Century Insurance, you can compare the effects of market volatilities on Ittehad Chemicals 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 Ittehad Chemicals with a short position of Century Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ittehad Chemicals and Century Insurance.

Diversification Opportunities for Ittehad Chemicals and Century Insurance

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Ittehad and Century is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ittehad Chemicals and Century Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Insurance and Ittehad Chemicals 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 Ittehad Chemicals 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 Ittehad Chemicals i.e., Ittehad Chemicals and Century Insurance go up and down completely randomly.

Pair Corralation between Ittehad Chemicals and Century Insurance

Assuming the 90 days trading horizon Ittehad Chemicals is expected to generate 1.5 times less return on investment than Century Insurance. But when comparing it to its historical volatility, Ittehad Chemicals is 1.1 times less risky than Century Insurance. It trades about 0.19 of its potential returns per unit of risk. Century Insurance is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  3,050  in Century Insurance on August 24, 2024 and sell it today you would earn a total of  348.00  from holding Century Insurance or generate 11.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Ittehad Chemicals  vs.  Century Insurance

 Performance 
       Timeline  
Ittehad Chemicals 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Ittehad Chemicals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ittehad Chemicals reported solid returns over the last few months and may actually be approaching a breakup point.
Century Insurance 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Century Insurance are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Century Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Ittehad Chemicals and Century Insurance Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ittehad Chemicals and Century Insurance

The main advantage of trading using opposite Ittehad Chemicals and Century Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ittehad Chemicals 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.
The idea behind Ittehad Chemicals and Century Insurance pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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