Correlation Between United Insurance and Pakistan Engineering
Can any of the company-specific risk be diversified away by investing in both United 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 United 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 United Insurance and Pakistan Engineering, you can compare the effects of market volatilities on United 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 United Insurance with a short position of Pakistan Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Insurance and Pakistan Engineering.
Diversification Opportunities for United Insurance and Pakistan Engineering
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between United and Pakistan is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance and Pakistan Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Engineering 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 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 United Insurance i.e., United Insurance and Pakistan Engineering go up and down completely randomly.
Pair Corralation between United Insurance and Pakistan Engineering
Assuming the 90 days trading horizon United Insurance is expected to generate 0.51 times more return on investment than Pakistan Engineering. However, United Insurance is 1.97 times less risky than Pakistan Engineering. It trades about -0.07 of its potential returns per unit of risk. Pakistan Engineering is currently generating about -0.07 per unit of risk. If you would invest 1,634 in United Insurance on October 9, 2024 and sell it today you would lose (33.00) from holding United Insurance or give up 2.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
United Insurance vs. Pakistan Engineering
Performance |
| Timeline |
| United Insurance |
| Pakistan Engineering |
United Insurance and Pakistan Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Insurance and Pakistan Engineering
The main advantage of trading using opposite United Insurance and Pakistan Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United 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.| United Insurance vs. Unity Foods | United Insurance vs. Hi Tech Lubricants | United Insurance vs. Fateh Sports Wear | United Insurance vs. Mughal Iron Steel |
| Pakistan Engineering vs. Bank of Punjab | Pakistan Engineering vs. Ittehad Chemicals | Pakistan Engineering vs. Shaheen Insurance | Pakistan Engineering vs. Reliance Insurance Co |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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