Correlation Between Roshan Packages and Atlas Insurance

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

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

Diversification Opportunities for Roshan Packages and Atlas Insurance

0.84

Correlation Coefficient

Roshan Packages  Atlas Insurance

Very poor diversification

The 3 months correlation between Roshan and Atlas is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Roshan Packages and Atlas Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Insurance and Roshan Packages 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 Roshan Packages are associated (or correlated) with Atlas Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Insurance has no effect on the direction of Roshan Packages i.e., Roshan Packages and Atlas Insurance go up and down completely randomly.

Pair Corralation between Roshan Packages and Atlas Insurance

Assuming the 90 days trading horizon Roshan Packages is expected to generate 1.41 times less return on investment than Atlas Insurance. In addition to that, Roshan Packages is 1.58 times more volatile than Atlas Insurance. It trades about 0.21 of its total potential returns per unit of risk. Atlas Insurance is currently generating about 0.46 per unit of volatility. If you would invest  4,975  in Atlas Insurance on September 14, 2024 and sell it today you would earn a total of  1,125  from holding Atlas Insurance or generate 22.61% return on investment over 90 days.

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

Roshan Packages  vs.  Atlas Insurance

Roshan Packages

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Roshan Packages are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Roshan Packages reported solid returns over the last few months and may actually be approaching a breakup point.

Atlas Insurance

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Insurance are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Atlas Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Roshan Packages and Atlas Insurance

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

The idea behind Roshan Packages and Atlas 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.