Correlation Between Adamjee Insurance and Agha Steel

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

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

Diversification Opportunities for Adamjee Insurance and Agha Steel

0.64

Correlation Coefficient

Adamjee Insurance  Agha Steel

Poor diversification

The 3 months correlation between Adamjee and Agha is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Adamjee Insurance and Agha Steel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agha Steel Industries and Adamjee 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 Adamjee Insurance are associated (or correlated) with Agha Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agha Steel Industries has no effect on the direction of Adamjee Insurance i.e., Adamjee Insurance and Agha Steel go up and down completely randomly.

Pair Corralation between Adamjee Insurance and Agha Steel

Assuming the 90 days trading horizon Adamjee Insurance is expected to generate 1.17 times more return on investment than Agha Steel. However, Adamjee Insurance is 1.17 times more volatile than Agha Steel Industries. It trades about -0.04 of its potential returns per unit of risk. Agha Steel Industries is currently generating about -0.11 per unit of risk. If you would invest  5,023  in Adamjee Insurance on December 30, 2024 and sell it today you would lose (364.00) from holding Adamjee Insurance or give up 7.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Adamjee Insurance  vs.  Agha Steel Industries

Adamjee Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adamjee Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Adamjee Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Adamjee Insurance and Agha Steel

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

The idea behind Adamjee Insurance and Agha Steel Industries 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.