Correlation Between JAIZ BANK and AIICO INSURANCE

Can any of the company-specific risk be diversified away by investing in both JAIZ BANK and AIICO 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 JAIZ BANK and AIICO INSURANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JAIZ BANK PLC and AIICO INSURANCE PLC, you can compare the effects of market volatilities on JAIZ BANK and AIICO 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 JAIZ BANK with a short position of AIICO INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAIZ BANK and AIICO INSURANCE.

Diversification Opportunities for JAIZ BANK and AIICO INSURANCE

0.28

Correlation Coefficient

JAIZ BANK  AIICO INSURANCE

Modest diversification

The 3 months correlation between JAIZ and AIICO is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding JAIZ BANK PLC and AIICO INSURANCE PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIICO INSURANCE PLC and JAIZ BANK 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 JAIZ BANK PLC are associated (or correlated) with AIICO INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIICO INSURANCE PLC has no effect on the direction of JAIZ BANK i.e., JAIZ BANK and AIICO INSURANCE go up and down completely randomly.

Pair Corralation between JAIZ BANK and AIICO INSURANCE

Assuming the 90 days trading horizon JAIZ BANK PLC is expected to generate 1.62 times more return on investment than AIICO INSURANCE. However, JAIZ BANK is 1.62 times more volatile than AIICO INSURANCE PLC. It trades about 0.07 of its potential returns per unit of risk. AIICO INSURANCE PLC is currently generating about 0.11 per unit of risk. If you would invest  222.00  in JAIZ BANK PLC on September 15, 2024 and sell it today you would earn a total of  28.00  from holding JAIZ BANK PLC or generate 12.61% return on investment over 90 days.

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

JAIZ BANK PLC  vs.  AIICO INSURANCE PLC

JAIZ BANK PLC

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JAIZ BANK PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, JAIZ BANK displayed solid returns over the last few months and may actually be approaching a breakup point.

AIICO INSURANCE PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AIICO INSURANCE PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, AIICO INSURANCE showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JAIZ BANK and AIICO INSURANCE

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

The idea behind JAIZ BANK PLC and AIICO INSURANCE PLC 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..