Correlation Between JS Investments and Reliance Insurance
Can any of the company-specific risk be diversified away by investing in both JS Investments 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 JS Investments and Reliance Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JS Investments and Reliance Insurance Co, you can compare the effects of market volatilities on JS Investments 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 JS Investments with a short position of Reliance Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of JS Investments and Reliance Insurance.
Diversification Opportunities for JS Investments and Reliance Insurance
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between JSIL and Reliance is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding JS Investments and Reliance Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Insurance and JS Investments 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 JS Investments 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 JS Investments i.e., JS Investments and Reliance Insurance go up and down completely randomly.
Pair Corralation between JS Investments and Reliance Insurance
Assuming the 90 days trading horizon JS Investments is expected to under-perform the Reliance Insurance. In addition to that, JS Investments is 1.07 times more volatile than Reliance Insurance Co. It trades about -0.1 of its total potential returns per unit of risk. Reliance Insurance Co is currently generating about 0.06 per unit of volatility. If you would invest 1,197 in Reliance Insurance Co on October 25, 2024 and sell it today you would earn a total of 38.00 from holding Reliance Insurance Co or generate 3.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JS Investments vs. Reliance Insurance Co
Performance |
| Timeline |
| JS Investments |
| Reliance Insurance |
JS Investments and Reliance Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JS Investments and Reliance Insurance
The main advantage of trading using opposite JS Investments and Reliance Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JS Investments 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.| JS Investments vs. Wah Nobel Chemicals | JS Investments vs. Pakistan Hotel Developers | JS Investments vs. Invest Capital Investment | JS Investments vs. WorldCall Telecom |
| 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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