Correlation Between Modaraba and Adamjee Insurance

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Can any of the company-specific risk be diversified away by investing in both Modaraba and Adamjee 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 Modaraba and Adamjee Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Modaraba Al Mali and Adamjee Insurance, you can compare the effects of market volatilities on Modaraba and Adamjee 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 Modaraba with a short position of Adamjee Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Modaraba and Adamjee Insurance.

Diversification Opportunities for Modaraba and Adamjee Insurance

  Correlation Coefficient

Very weak diversification

The 3 months correlation between Modaraba and Adamjee is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Modaraba Al-Mali and Adamjee Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adamjee Insurance and Modaraba 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 Modaraba Al Mali are associated (or correlated) with Adamjee Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adamjee Insurance has no effect on the direction of Modaraba i.e., Modaraba and Adamjee Insurance go up and down completely randomly.

Pair Corralation between Modaraba and Adamjee Insurance

Assuming the 90 days trading horizon Modaraba Al Mali is expected to under-perform the Adamjee Insurance. In addition to that, Modaraba is 1.94 times more volatile than Adamjee Insurance. It trades about -0.1 of its total potential returns per unit of risk. Adamjee Insurance is currently generating about -0.11 per unit of volatility. If you would invest  3,757  in Adamjee Insurance on November 24, 2023 and sell it today you would lose (167.00) from holding Adamjee Insurance or give up 4.45% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Modaraba Al-Mali  vs.  Adamjee Insurance

Modaraba Al-Mali 

Risk-Adjusted Performance

2 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Modaraba Al Mali are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak primary indicators, Modaraba may actually be approaching a critical reversion point that can send shares even higher in March 2024.
Adamjee Insurance 

Risk-Adjusted Performance

2 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Adamjee Insurance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Adamjee Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Modaraba and Adamjee Insurance Volatility Contrast

   Predicted Return Density   

Pair Trading with Modaraba and Adamjee Insurance

The main advantage of trading using opposite Modaraba and Adamjee Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Modaraba position performs unexpectedly, Adamjee 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 Adamjee Insurance will offset losses from the drop in Adamjee Insurance's long position.
The idea behind Modaraba Al Mali and Adamjee 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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