Correlation Between Premier Insurance and Pakistan National

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

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

Diversification Opportunities for Premier Insurance and Pakistan National

-0.42

Correlation Coefficient

Premier Insurance  Pakistan National

Very good diversification

The 3 months correlation between Premier and Pakistan is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Premier Insurance and Pakistan National Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan National and Premier Insurance 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 Premier Insurance are associated (or correlated) with Pakistan National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan National has no effect on the direction of Premier Insurance i.e., Premier Insurance and Pakistan National go up and down completely randomly.

Pair Corralation between Premier Insurance and Pakistan National

Assuming the 90 days trading horizon Premier Insurance is expected to generate 2.49 times less return on investment than Pakistan National. In addition to that, Premier Insurance is 2.48 times more volatile than Pakistan National Shipping. It trades about 0.03 of its total potential returns per unit of risk. Pakistan National Shipping is currently generating about 0.18 per unit of volatility. If you would invest  5,427  in Pakistan National Shipping on September 27, 2024 and sell it today you would earn a total of  44,720  from holding Pakistan National Shipping or generate 824.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	67.56%
Values	Daily Returns

Premier Insurance  vs.  Pakistan National Shipping

Premier Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premier Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pakistan National

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan National Shipping are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pakistan National sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Premier Insurance and Pakistan National

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

The idea behind Premier Insurance and Pakistan National Shipping 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 CEOs Directory module to screen CEOs from public companies around the world.