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
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.
Modaraba Al-Mali vs. Adamjee Insurance
Modaraba and Adamjee Insurance Volatility Contrast
Pair Trading with Modaraba and Adamjee InsuranceThe 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.
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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