Correlation Between Universal Insurance and Pace Pakistan
Can any of the company-specific risk be diversified away by investing in both Universal Insurance and Pace Pakistan 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 Pace Pakistan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Insurance and Pace Pakistan, you can compare the effects of market volatilities on Universal Insurance and Pace Pakistan 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 Pace Pakistan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Insurance and Pace Pakistan.
Diversification Opportunities for Universal Insurance and Pace Pakistan
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Universal and Pace is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance and Pace Pakistan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Pakistan 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 Pace Pakistan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Pakistan has no effect on the direction of Universal Insurance i.e., Universal Insurance and Pace Pakistan go up and down completely randomly.
Pair Corralation between Universal Insurance and Pace Pakistan
Assuming the 90 days trading horizon Universal Insurance is expected to generate 1.59 times more return on investment than Pace Pakistan. However, Universal Insurance is 1.59 times more volatile than Pace Pakistan. It trades about 0.08 of its potential returns per unit of risk. Pace Pakistan is currently generating about 0.06 per unit of risk. If you would invest 331.00 in Universal Insurance on October 30, 2024 and sell it today you would earn a total of 641.00 from holding Universal Insurance or generate 193.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 66.17% |
| Values | Daily Returns |
Universal Insurance vs. Pace Pakistan
Performance |
| Timeline |
| Universal Insurance |
| Pace Pakistan |
Universal Insurance and Pace Pakistan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Insurance and Pace Pakistan
The main advantage of trading using opposite Universal Insurance and Pace Pakistan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Insurance position performs unexpectedly, Pace Pakistan 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 Pace Pakistan will offset losses from the drop in Pace Pakistan's long position.| Universal Insurance vs. Pakistan Tobacco | Universal Insurance vs. Premier Insurance | Universal Insurance vs. ORIX Leasing Pakistan | Universal Insurance vs. Orient Rental Modaraba |
| Pace Pakistan vs. Habib Insurance | Pace Pakistan vs. Ghandhara Automobile | Pace Pakistan vs. Shadab Textile Mills | Pace Pakistan vs. Century 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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