Correlation Between Silkbank and Century Insurance
Can any of the company-specific risk be diversified away by investing in both Silkbank 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 Silkbank and Century Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Silkbank and Century Insurance, you can compare the effects of market volatilities on Silkbank 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 Silkbank with a short position of Century Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silkbank and Century Insurance.
Diversification Opportunities for Silkbank and Century Insurance
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Silkbank and Century is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Silkbank and Century Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Insurance and Silkbank 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 Silkbank 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 Silkbank i.e., Silkbank and Century Insurance go up and down completely randomly.
Pair Corralation between Silkbank and Century Insurance
Assuming the 90 days trading horizon Silkbank is expected to under-perform the Century Insurance. In addition to that, Silkbank is 3.7 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 0.22 per unit of volatility. If you would invest 3,724 in Century Insurance on October 25, 2024 and sell it today you would earn a total of 126.00 from holding Century Insurance or generate 3.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 90.0% |
| Values | Daily Returns |
Silkbank vs. Century Insurance
Performance |
| Timeline |
| Silkbank |
| Century Insurance |
Silkbank and Century Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silkbank and Century Insurance
The main advantage of trading using opposite Silkbank and Century Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silkbank 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.| Silkbank vs. NetSol Technologies | Silkbank vs. Pakistan Aluminium Beverage | Silkbank vs. Big Bird Foods | Silkbank vs. Matco Foods |
| Century Insurance vs. Lotte Chemical Pakistan | Century Insurance vs. Metropolitan Steel Corp | Century Insurance vs. Engro Polymer Chemicals | Century Insurance vs. ORIX Leasing Pakistan |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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