Correlation Between Pak Gulf and Habib Insurance

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

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

Diversification Opportunities for Pak Gulf and Habib Insurance

0.3

Correlation Coefficient

Pak Gulf  Habib Insurance

Weak diversification

The 3 months correlation between Pak and Habib is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Pak Gulf Leasing and Habib Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Insurance and Pak Gulf 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 Pak Gulf Leasing are associated (or correlated) with Habib Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Insurance has no effect on the direction of Pak Gulf i.e., Pak Gulf and Habib Insurance go up and down completely randomly.

Pair Corralation between Pak Gulf and Habib Insurance

Assuming the 90 days trading horizon Pak Gulf Leasing is expected to under-perform the Habib Insurance. In addition to that, Pak Gulf is 1.97 times more volatile than Habib Insurance. It trades about -0.01 of its total potential returns per unit of risk. Habib Insurance is currently generating about 0.1 per unit of volatility. If you would invest  786.00  in Habib Insurance on December 27, 2024 and sell it today you would earn a total of  136.00  from holding Habib Insurance or generate 17.3% return on investment over 90 days.

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

Pak Gulf Leasing  vs.  Habib Insurance

Pak Gulf Leasing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pak Gulf Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Pak Gulf is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Habib Insurance

Risk-Adjusted Performance

OK

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

Pair Trading with Pak Gulf and Habib Insurance

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

The idea behind Pak Gulf Leasing and Habib 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.