Correlation Between Adamjee Insurance and National Bank

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

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

Diversification Opportunities for Adamjee Insurance and National Bank

0.56

Correlation Coefficient

Adamjee Insurance  National Bank

Very weak diversification

The 3 months correlation between Adamjee and National is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Adamjee Insurance and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of Adamjee Insurance i.e., Adamjee Insurance and National Bank go up and down completely randomly.

Pair Corralation between Adamjee Insurance and National Bank

Assuming the 90 days trading horizon Adamjee Insurance is expected to generate 1.13 times more return on investment than National Bank. However, Adamjee Insurance is 1.13 times more volatile than National Bank of. It trades about 0.24 of its potential returns per unit of risk. National Bank of is currently generating about 0.14 per unit of risk. If you would invest  3,450  in Adamjee Insurance on September 15, 2024 and sell it today you would earn a total of  1,949  from holding Adamjee Insurance or generate 56.49% return on investment over 90 days.

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

Adamjee Insurance  vs.  National Bank of

Adamjee Insurance

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Adamjee Insurance are ranked lower than 18 (%) 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.

National Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, National Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adamjee Insurance and National Bank

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

The idea behind Adamjee Insurance and National Bank of 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.