Correlation Between IGI Life and Roshan Packages

Can any of the company-specific risk be diversified away by investing in both IGI Life and Roshan Packages 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 Roshan Packages 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 Roshan Packages, you can compare the effects of market volatilities on IGI Life and Roshan Packages 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 Roshan Packages. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGI Life and Roshan Packages.

Diversification Opportunities for IGI Life and Roshan Packages

0.68

Correlation Coefficient

IGI Life  Roshan Packages

Poor diversification

The 3 months correlation between IGI and Roshan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding IGI Life Insurance and Roshan Packages in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roshan Packages 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 Roshan Packages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roshan Packages has no effect on the direction of IGI Life i.e., IGI Life and Roshan Packages go up and down completely randomly.

Pair Corralation between IGI Life and Roshan Packages

Assuming the 90 days trading horizon IGI Life is expected to generate 5.32 times less return on investment than Roshan Packages. But when comparing it to its historical volatility, IGI Life Insurance is 1.04 times less risky than Roshan Packages. It trades about 0.01 of its potential returns per unit of risk. Roshan Packages is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,581  in Roshan Packages on October 25, 2024 and sell it today you would earn a total of  199.00  from holding Roshan Packages or generate 12.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.55%
Values	Daily Returns

IGI Life Insurance  vs.  Roshan Packages

IGI Life Insurance

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IGI Life Insurance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IGI Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Roshan Packages

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Roshan Packages are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Roshan Packages reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IGI Life and Roshan Packages

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

The idea behind IGI Life Insurance and Roshan Packages 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.