Correlation Between Reliance Insurance and Al Khair

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

By analyzing existing cross correlation between Reliance Insurance Co and Al Khair Gadoon Limited, you can compare the effects of market volatilities on Reliance Insurance and Al Khair 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 Reliance Insurance with a short position of Al Khair. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Insurance and Al Khair.

Diversification Opportunities for Reliance Insurance and Al Khair

0.49

Correlation Coefficient

Reliance Insurance  Al Khair

Very weak diversification

The 3 months correlation between Reliance and AKGL is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Insurance Co and Al Khair Gadoon Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Khair Gadoon and Reliance 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 Reliance Insurance Co are associated (or correlated) with Al Khair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Khair Gadoon has no effect on the direction of Reliance Insurance i.e., Reliance Insurance and Al Khair go up and down completely randomly.

Pair Corralation between Reliance Insurance and Al Khair

Assuming the 90 days trading horizon Reliance Insurance Co is expected to under-perform the Al Khair. But the stock apears to be less risky and, when comparing its historical volatility, Reliance Insurance Co is 1.03 times less risky than Al Khair. The stock trades about -0.15 of its potential returns per unit of risk. The Al Khair Gadoon Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,035  in Al Khair Gadoon Limited on October 8, 2024 and sell it today you would earn a total of  110.00  from holding Al Khair Gadoon Limited or generate 2.73% return on investment over 90 days.

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

Reliance Insurance Co  vs.  Al Khair Gadoon Limited

Reliance Insurance

Risk-Adjusted Performance

7 of 100

OK

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

Al Khair Gadoon

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Al Khair Gadoon Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Al Khair sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reliance Insurance and Al Khair

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

The idea behind Reliance Insurance Co and Al Khair Gadoon Limited 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.