Correlation Between Pak Gulf and Reliance Insurance
Can any of the company-specific risk be diversified away by investing in both Pak Gulf 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 Pak Gulf and Reliance Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pak Gulf Leasing and Reliance Insurance Co, you can compare the effects of market volatilities on Pak Gulf 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 Pak Gulf with a short position of Reliance Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pak Gulf and Reliance Insurance.
Diversification Opportunities for Pak Gulf and Reliance Insurance
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pak and Reliance is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Pak Gulf Leasing and Reliance Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Insurance and Pak Gulf 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 Pak Gulf Leasing 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 Pak Gulf i.e., Pak Gulf and Reliance Insurance go up and down completely randomly.
Pair Corralation between Pak Gulf and Reliance Insurance
Assuming the 90 days trading horizon Pak Gulf Leasing is expected to generate 2.41 times more return on investment than Reliance Insurance. However, Pak Gulf is 2.41 times more volatile than Reliance Insurance Co. It trades about 0.15 of its potential returns per unit of risk. Reliance Insurance Co is currently generating about 0.09 per unit of risk. If you would invest 951.00 in Pak Gulf Leasing on August 30, 2024 and sell it today you would earn a total of 152.00 from holding Pak Gulf Leasing or generate 15.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Pak Gulf Leasing vs. Reliance Insurance Co
Performance |
| Timeline |
| Pak Gulf Leasing |
| Reliance Insurance |
Pak Gulf and Reliance Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pak Gulf and Reliance Insurance
The main advantage of trading using opposite Pak Gulf and Reliance Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pak Gulf 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.| Pak Gulf vs. Masood Textile Mills | Pak Gulf vs. Fauji Foods | Pak Gulf vs. KSB Pumps | Pak Gulf vs. Mari Petroleum |
| Reliance Insurance vs. Masood Textile Mills | Reliance Insurance vs. Fauji Foods | Reliance Insurance vs. KSB Pumps | Reliance Insurance vs. Mari Petroleum |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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