Correlation Between Loads and Century Insurance
Can any of the company-specific risk be diversified away by investing in both Loads 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 Loads and Century Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Loads and Century Insurance, you can compare the effects of market volatilities on Loads 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 Loads with a short position of Century Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loads and Century Insurance.
Diversification Opportunities for Loads and Century Insurance
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Loads and Century is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Loads and Century Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Insurance and Loads 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 Loads 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 Loads i.e., Loads and Century Insurance go up and down completely randomly.
Pair Corralation between Loads and Century Insurance
Assuming the 90 days trading horizon Loads is expected to generate 2.79 times less return on investment than Century Insurance. But when comparing it to its historical volatility, Loads is 1.14 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 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,170 in Century Insurance on August 28, 2024 and sell it today you would earn a total of 2,550 from holding Century Insurance or generate 217.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 63.84% |
| Values | Daily Returns |
Loads vs. Century Insurance
Performance |
| Timeline |
| Loads |
| Century Insurance |
Loads and Century Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Loads and Century Insurance
The main advantage of trading using opposite Loads and Century Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loads 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 Loads 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.| Century Insurance vs. Habib Bank | Century Insurance vs. National Bank of | Century Insurance vs. United Bank | Century Insurance vs. MCB Bank |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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