Correlation Between Agha Steel and Century Insurance

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

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

Diversification Opportunities for Agha Steel and Century Insurance

-0.8

Correlation Coefficient

Agha Steel  Century Insurance

Pay attention - limited upside

The 3 months correlation between Agha and Century is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Agha Steel Industries and Century Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Insurance and Agha Steel 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 Agha Steel Industries are associated (or correlated) with Century Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Insurance has no effect on the direction of Agha Steel i.e., Agha Steel and Century Insurance go up and down completely randomly.

Pair Corralation between Agha Steel and Century Insurance

Assuming the 90 days trading horizon Agha Steel Industries is expected to under-perform the Century Insurance. In addition to that, Agha Steel is 1.17 times more volatile than Century Insurance. It trades about -0.06 of its total potential returns per unit of risk. Century Insurance is currently generating about 0.26 per unit of volatility. If you would invest  3,680  in Century Insurance on December 23, 2024 and sell it today you would earn a total of  1,114  from holding Century Insurance or generate 30.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Agha Steel Industries  vs.  Century Insurance

Agha Steel Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agha Steel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Century Insurance

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Century Insurance are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Century Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agha Steel and Century Insurance

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

The idea behind Agha Steel Industries and Century 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.