Correlation Between Shifa International and Century Insurance

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

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

Diversification Opportunities for Shifa International and Century Insurance

0.93

Correlation Coefficient

Shifa International  Century Insurance

Almost no diversification

The 3 months correlation between Shifa and Century is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Shifa International Hospitals and Century Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Insurance and Shifa International 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 Shifa International Hospitals are associated (or correlated) with Century Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Insurance has no effect on the direction of Shifa International i.e., Shifa International and Century Insurance go up and down completely randomly.

Pair Corralation between Shifa International and Century Insurance

Assuming the 90 days trading horizon Shifa International Hospitals is expected to generate 2.13 times more return on investment than Century Insurance. However, Shifa International is 2.13 times more volatile than Century Insurance. It trades about 0.36 of its potential returns per unit of risk. Century Insurance is currently generating about 0.32 per unit of risk. If you would invest  20,902  in Shifa International Hospitals on September 13, 2024 and sell it today you would earn a total of  18,852  from holding Shifa International Hospitals or generate 90.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.35%
Values	Daily Returns

Shifa International Hospitals  vs.  Century Insurance

Shifa International

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Shifa International Hospitals are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shifa International sustained solid returns over the last few months and may actually be approaching a breakup point.

Century Insurance

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Century Insurance are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Century Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shifa International and Century Insurance

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

The idea behind Shifa International Hospitals and Century 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.