Correlation Between Universal Insurance and Pakistan State
Can any of the company-specific risk be diversified away by investing in both Universal Insurance and Pakistan State 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 Pakistan State into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Insurance and Pakistan State Oil, you can compare the effects of market volatilities on Universal Insurance and Pakistan State 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 Pakistan State. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Insurance and Pakistan State.
Diversification Opportunities for Universal Insurance and Pakistan State
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Universal and Pakistan is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance and Pakistan State Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan State Oil 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 Pakistan State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan State Oil has no effect on the direction of Universal Insurance i.e., Universal Insurance and Pakistan State go up and down completely randomly.
Pair Corralation between Universal Insurance and Pakistan State
Assuming the 90 days trading horizon Universal Insurance is expected to generate 1.72 times less return on investment than Pakistan State. In addition to that, Universal Insurance is 1.34 times more volatile than Pakistan State Oil. It trades about 0.11 of its total potential returns per unit of risk. Pakistan State Oil is currently generating about 0.26 per unit of volatility. If you would invest 22,498 in Pakistan State Oil on October 25, 2024 and sell it today you would earn a total of 14,749 from holding Pakistan State Oil or generate 65.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Insurance vs. Pakistan State Oil
Performance |
| Timeline |
| Universal Insurance |
| Pakistan State Oil |
Universal Insurance and Pakistan State Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Insurance and Pakistan State
The main advantage of trading using opposite Universal Insurance and Pakistan State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Insurance position performs unexpectedly, Pakistan State 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 State will offset losses from the drop in Pakistan State's 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 |
| Pakistan State vs. Shaheen Insurance | Pakistan State vs. Adamjee Insurance | Pakistan State vs. Universal Insurance | Pakistan State vs. Ghandhara Automobile |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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