Correlation Between Universal Insurance and Ittehad Chemicals
Can any of the company-specific risk be diversified away by investing in both Universal Insurance and Ittehad Chemicals 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 Universal Insurance and Ittehad Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Insurance and Ittehad Chemicals, you can compare the effects of market volatilities on Universal Insurance and Ittehad Chemicals 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 Universal Insurance with a short position of Ittehad Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Insurance and Ittehad Chemicals.
Diversification Opportunities for Universal Insurance and Ittehad Chemicals
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Universal and Ittehad is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance and Ittehad Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ittehad Chemicals and Universal 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 Universal Insurance are associated (or correlated) with Ittehad Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ittehad Chemicals has no effect on the direction of Universal Insurance i.e., Universal Insurance and Ittehad Chemicals go up and down completely randomly.
Pair Corralation between Universal Insurance and Ittehad Chemicals
Assuming the 90 days trading horizon Universal Insurance is expected to generate 3.47 times more return on investment than Ittehad Chemicals. However, Universal Insurance is 3.47 times more volatile than Ittehad Chemicals. It trades about 0.08 of its potential returns per unit of risk. Ittehad Chemicals is currently generating about 0.11 per unit of risk. If you would invest 390.00 in Universal Insurance on October 25, 2024 and sell it today you would earn a total of 593.00 from holding Universal Insurance or generate 152.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 65.88% |
| Values | Daily Returns |
Universal Insurance vs. Ittehad Chemicals
Performance |
| Timeline |
| Universal Insurance |
| Ittehad Chemicals |
Universal Insurance and Ittehad Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Insurance and Ittehad Chemicals
The main advantage of trading using opposite Universal Insurance and Ittehad Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Insurance position performs unexpectedly, Ittehad Chemicals 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 Ittehad Chemicals will offset losses from the drop in Ittehad Chemicals' long position.| Universal Insurance vs. Engro Polymer Chemicals | Universal Insurance vs. Invest Capital Investment | Universal Insurance vs. Orient Rental Modaraba | Universal Insurance vs. Ghani Chemical Industries |
| Ittehad Chemicals vs. Pakistan Synthetics | Ittehad Chemicals vs. Orient Rental Modaraba | Ittehad Chemicals vs. EFU General Insurance | Ittehad Chemicals vs. Synthetic Products Enterprises |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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