Correlation Between Faysal Bank and Adamjee Insurance

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

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

Diversification Opportunities for Faysal Bank and Adamjee Insurance

-0.28

Correlation Coefficient

Faysal Bank  Adamjee Insurance

Very good diversification

The 3 months correlation between Faysal and Adamjee is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Faysal Bank and Adamjee Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adamjee Insurance and Faysal Bank 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 Faysal Bank are associated (or correlated) with Adamjee Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adamjee Insurance has no effect on the direction of Faysal Bank i.e., Faysal Bank and Adamjee Insurance go up and down completely randomly.

Pair Corralation between Faysal Bank and Adamjee Insurance

Assuming the 90 days trading horizon Faysal Bank is expected to generate 0.64 times more return on investment than Adamjee Insurance. However, Faysal Bank is 1.56 times less risky than Adamjee Insurance. It trades about 0.04 of its potential returns per unit of risk. Adamjee Insurance is currently generating about -0.04 per unit of risk. If you would invest  4,650  in Faysal Bank on December 30, 2024 and sell it today you would earn a total of  154.00  from holding Faysal Bank or generate 3.31% return on investment over 90 days.

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

Faysal Bank  vs.  Adamjee Insurance

Faysal Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Faysal Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Faysal Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Adamjee Insurance

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Faysal Bank and Adamjee Insurance

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

The idea behind Faysal Bank and Adamjee 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.