Correlation Between Habib Sugar and Century Insurance

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

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

Diversification Opportunities for Habib Sugar and Century Insurance

-0.55

Correlation Coefficient

Habib Sugar  Century Insurance

Excellent diversification

The 3 months correlation between Habib and Century is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Habib Sugar Mills and Century Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Insurance and Habib Sugar 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 Habib Sugar Mills 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 Habib Sugar i.e., Habib Sugar and Century Insurance go up and down completely randomly.

Pair Corralation between Habib Sugar and Century Insurance

Assuming the 90 days trading horizon Habib Sugar Mills is expected to under-perform the Century Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Habib Sugar Mills is 1.01 times less risky than Century Insurance. The stock trades about -0.09 of its potential returns per unit of risk. The Century Insurance is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  3,724  in Century Insurance on December 24, 2024 and sell it today you would earn a total of  1,070  from holding Century Insurance or generate 28.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Habib Sugar Mills  vs.  Century Insurance

Habib Sugar Mills

Risk-Adjusted Performance

Very Weak

Over the last 90 days Habib Sugar Mills has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Century Insurance

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Century Insurance are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Century Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Habib Sugar and Century Insurance

The main advantage of trading using opposite Habib Sugar and Century Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Habib Sugar 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 Habib Sugar Mills 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.