Correlation Between Habib Insurance and KOT Addu

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

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

Diversification Opportunities for Habib Insurance and KOT Addu

0.16

Correlation Coefficient

Habib Insurance  KOT Addu

Average diversification

The 3 months correlation between Habib and KOT is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Habib Insurance and KOT Addu Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KOT Addu Power and Habib 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 Habib Insurance are associated (or correlated) with KOT Addu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KOT Addu Power has no effect on the direction of Habib Insurance i.e., Habib Insurance and KOT Addu go up and down completely randomly.

Pair Corralation between Habib Insurance and KOT Addu

Assuming the 90 days trading horizon Habib Insurance is expected to generate 3.15 times more return on investment than KOT Addu. However, Habib Insurance is 3.15 times more volatile than KOT Addu Power. It trades about 0.07 of its potential returns per unit of risk. KOT Addu Power is currently generating about 0.04 per unit of risk. 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 Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Habib Insurance  vs.  KOT Addu Power

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.

KOT Addu Power

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Habib Insurance and KOT Addu

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

The idea behind Habib Insurance and KOT Addu Power 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.