Correlation Between IGI Life and Ghani Gases

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

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

Diversification Opportunities for IGI Life and Ghani Gases

0.62

Correlation Coefficient

IGI Life  Ghani Gases

Poor diversification

The 3 months correlation between IGI and Ghani is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding IGI Life Insurance and Ghani Gases in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ghani Gases and IGI Life 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 IGI Life Insurance are associated (or correlated) with Ghani Gases. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ghani Gases has no effect on the direction of IGI Life i.e., IGI Life and Ghani Gases go up and down completely randomly.

Pair Corralation between IGI Life and Ghani Gases

Assuming the 90 days trading horizon IGI Life is expected to generate 1.35 times less return on investment than Ghani Gases. In addition to that, IGI Life is 1.13 times more volatile than Ghani Gases. It trades about 0.05 of its total potential returns per unit of risk. Ghani Gases is currently generating about 0.07 per unit of volatility. If you would invest  1,115  in Ghani Gases on October 9, 2024 and sell it today you would earn a total of  339.00  from holding Ghani Gases or generate 30.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	91.3%
Values	Daily Returns

IGI Life Insurance  vs.  Ghani Gases

IGI Life Insurance

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IGI Life Insurance are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IGI Life sustained solid returns over the last few months and may actually be approaching a breakup point.

Ghani Gases

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ghani Gases are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ghani Gases reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IGI Life and Ghani Gases

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

The idea behind IGI Life Insurance and Ghani Gases 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.