Correlation Between De Licacy and First Insurance

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

By analyzing existing cross correlation between De Licacy Industrial and First Insurance Co, you can compare the effects of market volatilities on De Licacy and First 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 De Licacy with a short position of First Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of De Licacy and First Insurance.

Diversification Opportunities for De Licacy and First Insurance

0.38

Correlation Coefficient

De Licacy  First Insurance

Weak diversification

The 3 months correlation between 1464 and First is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding De Licacy Industrial and First Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Insurance and De Licacy 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 De Licacy Industrial are associated (or correlated) with First Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Insurance has no effect on the direction of De Licacy i.e., De Licacy and First Insurance go up and down completely randomly.

Pair Corralation between De Licacy and First Insurance

Assuming the 90 days trading horizon De Licacy is expected to generate 1.65 times less return on investment than First Insurance. In addition to that, De Licacy is 1.13 times more volatile than First Insurance Co. It trades about 0.04 of its total potential returns per unit of risk. First Insurance Co is currently generating about 0.07 per unit of volatility. If you would invest  1,640  in First Insurance Co on October 23, 2024 and sell it today you would earn a total of  850.00  from holding First Insurance Co or generate 51.83% return on investment over 90 days.

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

De Licacy Industrial  vs.  First Insurance Co

De Licacy Industrial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in De Licacy Industrial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, De Licacy showed solid returns over the last few months and may actually be approaching a breakup point.

First Insurance

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Insurance Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, First Insurance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with De Licacy and First Insurance

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

The idea behind De Licacy Industrial and First Insurance Co 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.