Correlation Between Pakistan Reinsurance and Avanceon

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

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

Diversification Opportunities for Pakistan Reinsurance and Avanceon

0.75

Correlation Coefficient

Pakistan Reinsurance  Avanceon

Poor diversification

The 3 months correlation between Pakistan and Avanceon is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Reinsurance and Avanceon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanceon and Pakistan Reinsurance 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 Pakistan Reinsurance are associated (or correlated) with Avanceon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanceon has no effect on the direction of Pakistan Reinsurance i.e., Pakistan Reinsurance and Avanceon go up and down completely randomly.

Pair Corralation between Pakistan Reinsurance and Avanceon

Assuming the 90 days trading horizon Pakistan Reinsurance is expected to under-perform the Avanceon. But the stock apears to be less risky and, when comparing its historical volatility, Pakistan Reinsurance is 1.03 times less risky than Avanceon. The stock trades about -0.06 of its potential returns per unit of risk. The Avanceon is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5,914  in Avanceon on October 23, 2024 and sell it today you would earn a total of  43.00  from holding Avanceon or generate 0.73% return on investment over 90 days.

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

Pakistan Reinsurance  vs.  Avanceon

Pakistan Reinsurance

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Reinsurance are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Pakistan Reinsurance disclosed solid returns over the last few months and may actually be approaching a breakup point.

Avanceon

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avanceon are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Avanceon may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pakistan Reinsurance and Avanceon

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

The idea behind Pakistan Reinsurance and Avanceon 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.