Correlation Between Adamjee Insurance and Ghani Gases

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

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

Diversification Opportunities for Adamjee Insurance and Ghani Gases

0.12

Correlation Coefficient

Adamjee Insurance  Ghani Gases

Average diversification

The 3 months correlation between Adamjee and Ghani is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Adamjee Insurance and Ghani Gases in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ghani Gases 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 Ghani Gases. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ghani Gases has no effect on the direction of Adamjee Insurance i.e., Adamjee Insurance and Ghani Gases go up and down completely randomly.

Pair Corralation between Adamjee Insurance and Ghani Gases

Assuming the 90 days trading horizon Adamjee Insurance is expected to under-perform the Ghani Gases. But the stock apears to be less risky and, when comparing its historical volatility, Adamjee Insurance is 1.13 times less risky than Ghani Gases. The stock trades about -0.03 of its potential returns per unit of risk. The Ghani Gases is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,438  in Ghani Gases on December 22, 2024 and sell it today you would lose (37.00) from holding Ghani Gases or give up 2.57% of portfolio value over 90 days.

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

Adamjee Insurance  vs.  Ghani Gases

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.

Ghani Gases

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ghani Gases has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Ghani Gases is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Adamjee Insurance and Ghani Gases

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

The idea behind Adamjee Insurance and Ghani Gases 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.