Correlation Between United Insurance and Habib Metropolitan

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

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

Diversification Opportunities for United Insurance and Habib Metropolitan

0.03

Correlation Coefficient

United Insurance  Habib Metropolitan

Significant diversification

The 3 months correlation between United and Habib is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance and Habib Metropolitan Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Metropolitan Bank and United 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 United Insurance are associated (or correlated) with Habib Metropolitan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Metropolitan Bank has no effect on the direction of United Insurance i.e., United Insurance and Habib Metropolitan go up and down completely randomly.

Pair Corralation between United Insurance and Habib Metropolitan

Assuming the 90 days trading horizon United Insurance is expected to generate 6.96 times less return on investment than Habib Metropolitan. But when comparing it to its historical volatility, United Insurance is 1.83 times less risky than Habib Metropolitan. It trades about 0.07 of its potential returns per unit of risk. Habib Metropolitan Bank is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  8,332  in Habib Metropolitan Bank on October 24, 2024 and sell it today you would earn a total of  1,561  from holding Habib Metropolitan Bank or generate 18.73% return on investment over 90 days.

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

United Insurance  vs.  Habib Metropolitan Bank

United Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, United Insurance is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Habib Metropolitan Bank

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Metropolitan Bank are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Habib Metropolitan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Insurance and Habib Metropolitan

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

The idea behind United Insurance and Habib Metropolitan Bank 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.