Correlation Between Avanceon and Pakistan Reinsurance

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

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

Diversification Opportunities for Avanceon and Pakistan Reinsurance

0.79

Correlation Coefficient

Avanceon  Pakistan Reinsurance

Poor diversification

The 3 months correlation between Avanceon and Pakistan is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Avanceon and Pakistan Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Reinsurance and Avanceon 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 Avanceon are associated (or correlated) with Pakistan Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Reinsurance has no effect on the direction of Avanceon i.e., Avanceon and Pakistan Reinsurance go up and down completely randomly.

Pair Corralation between Avanceon and Pakistan Reinsurance

Assuming the 90 days trading horizon Avanceon is expected to generate 2.51 times less return on investment than Pakistan Reinsurance. But when comparing it to its historical volatility, Avanceon is 1.28 times less risky than Pakistan Reinsurance. It trades about 0.11 of its potential returns per unit of risk. Pakistan Reinsurance is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,124  in Pakistan Reinsurance on October 9, 2024 and sell it today you would earn a total of  425.00  from holding Pakistan Reinsurance or generate 37.81% return on investment over 90 days.

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

Avanceon  vs.  Pakistan Reinsurance

Avanceon

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avanceon are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Avanceon reported solid returns over the last few months and may actually be approaching a breakup point.

Pakistan Reinsurance

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Reinsurance are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Pakistan Reinsurance disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avanceon and Pakistan Reinsurance

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

The idea behind Avanceon and Pakistan Reinsurance 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.