Correlation Between United Insurance and Ghani Chemical
Can any of the company-specific risk be diversified away by investing in both United Insurance and Ghani Chemical 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 United Insurance and Ghani Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Insurance and Ghani Chemical Industries, you can compare the effects of market volatilities on United Insurance and Ghani Chemical 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 United Insurance with a short position of Ghani Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Insurance and Ghani Chemical.
Diversification Opportunities for United Insurance and Ghani Chemical
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Ghani is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance and Ghani Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ghani Chemical Industries and United 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 United Insurance are associated (or correlated) with Ghani Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ghani Chemical Industries has no effect on the direction of United Insurance i.e., United Insurance and Ghani Chemical go up and down completely randomly.
Pair Corralation between United Insurance and Ghani Chemical
Assuming the 90 days trading horizon United Insurance is expected to generate 4.34 times less return on investment than Ghani Chemical. But when comparing it to its historical volatility, United Insurance is 2.36 times less risky than Ghani Chemical. It trades about 0.11 of its potential returns per unit of risk. Ghani Chemical Industries is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,658 in Ghani Chemical Industries on November 18, 2024 and sell it today you would earn a total of 323.00 from holding Ghani Chemical Industries or generate 19.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Insurance vs. Ghani Chemical Industries
Performance |
| Timeline |
| United Insurance |
| Ghani Chemical Industries |
United Insurance and Ghani Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Insurance and Ghani Chemical
The main advantage of trading using opposite United Insurance and Ghani Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Insurance position performs unexpectedly, Ghani Chemical 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 Ghani Chemical will offset losses from the drop in Ghani Chemical's long position.| United Insurance vs. Pakistan Aluminium Beverage | United Insurance vs. Beco Steel | United Insurance vs. Agha Steel Industries | United Insurance vs. Engro Polymer Chemicals |
| Ghani Chemical vs. Habib Insurance | Ghani Chemical vs. Agritech | Ghani Chemical vs. Atlas Insurance | Ghani Chemical vs. Premier Insurance |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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