Correlation Between Adamjee Insurance and International Steels

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

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

Diversification Opportunities for Adamjee Insurance and International Steels

0.84

Correlation Coefficient

Adamjee Insurance  International Steels

Very poor diversification

The 3 months correlation between Adamjee and International is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Adamjee Insurance and International Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Steels 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 International Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Steels has no effect on the direction of Adamjee Insurance i.e., Adamjee Insurance and International Steels go up and down completely randomly.

Pair Corralation between Adamjee Insurance and International Steels

Assuming the 90 days trading horizon Adamjee Insurance is expected to under-perform the International Steels. In addition to that, Adamjee Insurance is 1.12 times more volatile than International Steels. It trades about -0.06 of its total potential returns per unit of risk. International Steels is currently generating about 0.26 per unit of volatility. If you would invest  8,268  in International Steels on October 11, 2024 and sell it today you would earn a total of  1,334  from holding International Steels or generate 16.13% return on investment over 90 days.

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

Adamjee Insurance  vs.  International Steels

Adamjee Insurance

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Adamjee Insurance are ranked lower than 16 (%) 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.

International Steels

Risk-Adjusted Performance

17 of 100

Solid

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

Pair Trading with Adamjee Insurance and International Steels

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

The idea behind Adamjee Insurance and International Steels 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.