Correlation Between Pakistan Reinsurance and Crescent Star

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

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

Diversification Opportunities for Pakistan Reinsurance and Crescent Star

0.73

Correlation Coefficient

Pakistan Reinsurance  Crescent Star

Poor diversification

The 3 months correlation between Pakistan and Crescent is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Reinsurance and Crescent Star Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Star Insurance 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 Crescent Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Star Insurance has no effect on the direction of Pakistan Reinsurance i.e., Pakistan Reinsurance and Crescent Star go up and down completely randomly.

Pair Corralation between Pakistan Reinsurance and Crescent Star

Assuming the 90 days trading horizon Pakistan Reinsurance is expected to generate 1.16 times more return on investment than Crescent Star. However, Pakistan Reinsurance is 1.16 times more volatile than Crescent Star Insurance. It trades about 0.19 of its potential returns per unit of risk. Crescent Star Insurance is currently generating about 0.06 per unit of risk. If you would invest  1,029  in Pakistan Reinsurance on October 24, 2024 and sell it today you would earn a total of  472.00  from holding Pakistan Reinsurance or generate 45.87% 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.  Crescent Star Insurance

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.

Crescent Star Insurance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Crescent Star Insurance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Crescent Star may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pakistan Reinsurance and Crescent Star

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

The idea behind Pakistan Reinsurance and Crescent Star 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.