Correlation Between Mari Petroleum and Century Insurance
Can any of the company-specific risk be diversified away by investing in both Mari Petroleum 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 Mari Petroleum and Century Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mari Petroleum and Century Insurance, you can compare the effects of market volatilities on Mari Petroleum 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 Mari Petroleum with a short position of Century Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mari Petroleum and Century Insurance.
Diversification Opportunities for Mari Petroleum and Century Insurance
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mari and Century is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Mari Petroleum and Century Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Insurance and Mari Petroleum 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 Mari Petroleum 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 Mari Petroleum i.e., Mari Petroleum and Century Insurance go up and down completely randomly.
Pair Corralation between Mari Petroleum and Century Insurance
Assuming the 90 days trading horizon Mari Petroleum is expected to under-perform the Century Insurance. In addition to that, Mari Petroleum is 2.59 times more volatile than Century Insurance. It trades about -0.02 of its total potential returns per unit of risk. Century Insurance is currently generating about 0.37 per unit of volatility. If you would invest 3,680 in Century Insurance on October 21, 2024 and sell it today you would earn a total of 209.00 from holding Century Insurance or generate 5.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 90.0% |
| Values | Daily Returns |
Mari Petroleum vs. Century Insurance
Performance |
| Timeline |
| Mari Petroleum |
| Century Insurance |
Mari Petroleum and Century Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mari Petroleum and Century Insurance
The main advantage of trading using opposite Mari Petroleum and Century Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mari Petroleum 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.| Mari Petroleum vs. Unilever Pakistan Foods | Mari Petroleum vs. Sardar Chemical Industries | Mari Petroleum vs. Fauji Foods | Mari Petroleum vs. Big Bird Foods |
| Century Insurance vs. Synthetic Products Enterprises | Century Insurance vs. Ittehad Chemicals | Century Insurance vs. Askari Bank | Century Insurance vs. Pakistan Tobacco |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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