Correlation Between Bawany Air and Habib Insurance

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

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

Diversification Opportunities for Bawany Air and Habib Insurance

-0.34

Correlation Coefficient

Bawany Air  Habib Insurance

Very good diversification

The 3 months correlation between Bawany and Habib is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bawany Air Products and Habib Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Insurance and Bawany Air 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 Bawany Air Products are associated (or correlated) with Habib Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Insurance has no effect on the direction of Bawany Air i.e., Bawany Air and Habib Insurance go up and down completely randomly.

Pair Corralation between Bawany Air and Habib Insurance

Assuming the 90 days trading horizon Bawany Air Products is expected to under-perform the Habib Insurance. In addition to that, Bawany Air is 1.23 times more volatile than Habib Insurance. It trades about -0.19 of its total potential returns per unit of risk. Habib Insurance is currently generating about 0.07 per unit of volatility. If you would invest  841.00  in Habib Insurance on December 30, 2024 and sell it today you would earn a total of  86.00  from holding Habib Insurance or generate 10.23% return on investment over 90 days.

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

Bawany Air Products  vs.  Habib Insurance

Bawany Air Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bawany Air Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Habib Insurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Insurance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Habib Insurance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bawany Air and Habib Insurance

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

The idea behind Bawany Air Products and Habib 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 Stocks Directory module to find actively traded stocks across global markets.