Correlation Between Atlas Insurance and Nestle Pakistan

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

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

Diversification Opportunities for Atlas Insurance and Nestle Pakistan

-0.11

Correlation Coefficient

Atlas Insurance  Nestle Pakistan

Good diversification

The 3 months correlation between Atlas and Nestle is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Insurance and Nestle Pakistan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestle Pakistan and Atlas 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 Atlas Insurance are associated (or correlated) with Nestle Pakistan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestle Pakistan has no effect on the direction of Atlas Insurance i.e., Atlas Insurance and Nestle Pakistan go up and down completely randomly.

Pair Corralation between Atlas Insurance and Nestle Pakistan

Assuming the 90 days trading horizon Atlas Insurance is expected to generate 1.51 times more return on investment than Nestle Pakistan. However, Atlas Insurance is 1.51 times more volatile than Nestle Pakistan. It trades about 0.12 of its potential returns per unit of risk. Nestle Pakistan is currently generating about -0.01 per unit of risk. If you would invest  5,252  in Atlas Insurance on December 31, 2024 and sell it today you would earn a total of  521.00  from holding Atlas Insurance or generate 9.92% return on investment over 90 days.

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

Atlas Insurance  vs.  Nestle Pakistan

Atlas Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Insurance are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Atlas Insurance may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Nestle Pakistan

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Atlas Insurance and Nestle Pakistan

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

The idea behind Atlas Insurance and Nestle Pakistan 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .