Correlation Between First Insurance and Unitech Computer

Can any of the company-specific risk be diversified away by investing in both First Insurance and Unitech Computer 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 Unitech Computer 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 Unitech Computer Co, you can compare the effects of market volatilities on First Insurance and Unitech Computer 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 Unitech Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Insurance and Unitech Computer.

Diversification Opportunities for First Insurance and Unitech Computer

0.89

Correlation Coefficient

First Insurance  Unitech Computer

Very poor diversification

The 3 months correlation between First and Unitech is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding First Insurance Co and Unitech Computer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unitech Computer 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 Unitech Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unitech Computer has no effect on the direction of First Insurance i.e., First Insurance and Unitech Computer go up and down completely randomly.

Pair Corralation between First Insurance and Unitech Computer

Assuming the 90 days trading horizon First Insurance Co is expected to generate 0.74 times more return on investment than Unitech Computer. However, First Insurance Co is 1.36 times less risky than Unitech Computer. It trades about 0.27 of its potential returns per unit of risk. Unitech Computer Co is currently generating about 0.09 per unit of risk. If you would invest  2,235  in First Insurance Co on September 13, 2024 and sell it today you would earn a total of  320.00  from holding First Insurance Co or generate 14.32% return on investment over 90 days.

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

First Insurance Co  vs.  Unitech Computer Co

First Insurance

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Insurance Co are ranked lower than 20 (%) 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.

Unitech Computer

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Unitech Computer Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Unitech Computer 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 Unitech Computer

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

The idea behind First Insurance Co and Unitech Computer 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.