Correlation Between Shifa International and Habib Insurance

Can any of the company-specific risk be diversified away by investing in both Shifa International 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 Shifa International and Habib 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 Habib Insurance, you can compare the effects of market volatilities on Shifa International 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 Shifa International with a short position of Habib Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shifa International and Habib Insurance.

Diversification Opportunities for Shifa International and Habib Insurance

0.48

Correlation Coefficient

Shifa International  Habib Insurance

Very weak diversification

The 3 months correlation between Shifa and Habib is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Shifa International Hospitals and Habib Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib 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 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 Shifa International i.e., Shifa International and Habib Insurance go up and down completely randomly.

Pair Corralation between Shifa International and Habib Insurance

Assuming the 90 days trading horizon Shifa International Hospitals is expected to generate 1.02 times more return on investment than Habib Insurance. However, Shifa International is 1.02 times more volatile than Habib Insurance. It trades about 0.39 of its potential returns per unit of risk. Habib Insurance is currently generating about 0.17 per unit of risk. If you would invest  15,559  in Shifa International Hospitals on September 13, 2024 and sell it today you would earn a total of  24,195  from holding Shifa International Hospitals or generate 155.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	87.3%
Values	Daily Returns

Shifa International Hospitals  vs.  Habib 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.

Habib Insurance

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Insurance are ranked lower than 13 (%) 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 Shifa International and Habib Insurance

The main advantage of trading using opposite Shifa International and Habib Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shifa International 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 Shifa International Hospitals 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.