Correlation Between Reliance Insurance and Pakistan Engineering
Can any of the company-specific risk be diversified away by investing in both Reliance Insurance and Pakistan Engineering 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 Reliance Insurance and Pakistan Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reliance Insurance Co and Pakistan Engineering, you can compare the effects of market volatilities on Reliance Insurance and Pakistan Engineering 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 Reliance Insurance with a short position of Pakistan Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Insurance and Pakistan Engineering.
Diversification Opportunities for Reliance Insurance and Pakistan Engineering
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Reliance and Pakistan is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Insurance Co and Pakistan Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Engineering and Reliance Insurance 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 Reliance Insurance Co are associated (or correlated) with Pakistan Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Engineering has no effect on the direction of Reliance Insurance i.e., Reliance Insurance and Pakistan Engineering go up and down completely randomly.
Pair Corralation between Reliance Insurance and Pakistan Engineering
Assuming the 90 days trading horizon Reliance Insurance Co is expected to generate 1.49 times more return on investment than Pakistan Engineering. However, Reliance Insurance is 1.49 times more volatile than Pakistan Engineering. It trades about 0.11 of its potential returns per unit of risk. Pakistan Engineering is currently generating about -0.16 per unit of risk. If you would invest 1,164 in Reliance Insurance Co on September 12, 2024 and sell it today you would earn a total of 88.00 from holding Reliance Insurance Co or generate 7.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Reliance Insurance Co vs. Pakistan Engineering
Performance |
| Timeline |
| Reliance Insurance |
| Pakistan Engineering |
Reliance Insurance and Pakistan Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Insurance and Pakistan Engineering
The main advantage of trading using opposite Reliance Insurance and Pakistan Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Insurance position performs unexpectedly, Pakistan Engineering 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 Pakistan Engineering will offset losses from the drop in Pakistan Engineering's long position.| Reliance Insurance vs. Masood Textile Mills | Reliance Insurance vs. Fauji Foods | Reliance Insurance vs. KSB Pumps | Reliance Insurance vs. Mari Petroleum |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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