Correlation Between First Insurance and Camellia Metal

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

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

Diversification Opportunities for First Insurance and Camellia Metal

-0.58

Correlation Coefficient

First Insurance  Camellia Metal

Excellent diversification

The 3 months correlation between First and Camellia is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding First Insurance Co and Camellia Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Camellia Metal and First 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 First Insurance Co are associated (or correlated) with Camellia Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Camellia Metal has no effect on the direction of First Insurance i.e., First Insurance and Camellia Metal go up and down completely randomly.

Pair Corralation between First Insurance and Camellia Metal

Assuming the 90 days trading horizon First Insurance Co is expected to generate 0.43 times more return on investment than Camellia Metal. However, First Insurance Co is 2.31 times less risky than Camellia Metal. It trades about 0.25 of its potential returns per unit of risk. Camellia Metal Co is currently generating about 0.02 per unit of risk. If you would invest  2,255  in First Insurance Co on September 14, 2024 and sell it today you would earn a total of  295.00  from holding First Insurance Co or generate 13.08% return on investment over 90 days.

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

First Insurance Co  vs.  Camellia Metal Co

First Insurance

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Insurance Co are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, First Insurance showed solid returns over the last few months and may actually be approaching a breakup point.

Camellia Metal

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Camellia Metal Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Camellia Metal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Insurance and Camellia Metal

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

The idea behind First Insurance Co and Camellia Metal 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.