Correlation Between Alfalah Consumer and Adamjee Insurance

Can any of the company-specific risk be diversified away by investing in both Alfalah Consumer and Adamjee Insurance 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 Alfalah Consumer and Adamjee Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alfalah Consumer and Adamjee Insurance, you can compare the effects of market volatilities on Alfalah Consumer and Adamjee Insurance 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 Alfalah Consumer with a short position of Adamjee Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfalah Consumer and Adamjee Insurance.

Diversification Opportunities for Alfalah Consumer and Adamjee Insurance

0.95

Correlation Coefficient

Alfalah Consumer  Adamjee Insurance

Almost no diversification

The 3 months correlation between Alfalah and Adamjee is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Alfalah Consumer and Adamjee Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adamjee Insurance and Alfalah Consumer 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 Alfalah Consumer are associated (or correlated) with Adamjee Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adamjee Insurance has no effect on the direction of Alfalah Consumer i.e., Alfalah Consumer and Adamjee Insurance go up and down completely randomly.

Pair Corralation between Alfalah Consumer and Adamjee Insurance

Assuming the 90 days trading horizon Alfalah Consumer is expected to generate 0.89 times more return on investment than Adamjee Insurance. However, Alfalah Consumer is 1.12 times less risky than Adamjee Insurance. It trades about 0.26 of its potential returns per unit of risk. Adamjee Insurance is currently generating about 0.16 per unit of risk. If you would invest  1,120  in Alfalah Consumer on September 26, 2024 and sell it today you would earn a total of  369.00  from holding Alfalah Consumer or generate 32.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	92.86%
Values	Daily Returns

Alfalah Consumer  vs.  Adamjee Insurance

Alfalah Consumer

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alfalah Consumer are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Alfalah Consumer sustained solid returns over the last few months and may actually be approaching a breakup point.

Adamjee Insurance

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Adamjee Insurance are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Adamjee Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alfalah Consumer and Adamjee Insurance

The main advantage of trading using opposite Alfalah Consumer and Adamjee Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfalah Consumer position performs unexpectedly, Adamjee Insurance 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 Adamjee Insurance will offset losses from the drop in Adamjee Insurance's long position.

The idea behind Alfalah Consumer and Adamjee Insurance pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.