Correlation Between AKD Hospitality and Century Insurance

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

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

Diversification Opportunities for AKD Hospitality and Century Insurance

0.82

Correlation Coefficient

AKD Hospitality  Century Insurance

Very poor diversification

The 3 months correlation between AKD and Century is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding AKD Hospitality and Century Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Insurance and AKD Hospitality 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 AKD Hospitality 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 AKD Hospitality i.e., AKD Hospitality and Century Insurance go up and down completely randomly.

Pair Corralation between AKD Hospitality and Century Insurance

Assuming the 90 days trading horizon AKD Hospitality is expected to generate 11.24 times less return on investment than Century Insurance. In addition to that, AKD Hospitality is 1.0 times more volatile than Century Insurance. It trades about 0.01 of its total potential returns per unit of risk. Century Insurance is currently generating about 0.11 per unit of volatility. If you would invest  2,035  in Century Insurance on October 9, 2024 and sell it today you would earn a total of  1,768  from holding Century Insurance or generate 86.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	93.98%
Values	Daily Returns

AKD Hospitality  vs.  Century Insurance

AKD Hospitality

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AKD Hospitality are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, AKD Hospitality disclosed solid returns over the last few months and may actually be approaching a breakup point.

Century Insurance

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Century Insurance are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Century Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AKD Hospitality and Century Insurance

The main advantage of trading using opposite AKD Hospitality and Century Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AKD Hospitality 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 AKD Hospitality 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.