Correlation Between First Insurance and Powertech Industrial

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

Diversification Opportunities for First Insurance and Powertech Industrial

-0.75

Correlation Coefficient

First Insurance  Powertech Industrial

Pay attention - limited upside

The 3 months correlation between First and Powertech is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding First Insurance Co and Powertech Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powertech Industrial 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 Powertech Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powertech Industrial has no effect on the direction of First Insurance i.e., First Insurance and Powertech Industrial go up and down completely randomly.

Pair Corralation between First Insurance and Powertech Industrial

Assuming the 90 days trading horizon First Insurance Co is expected to generate 0.67 times more return on investment than Powertech Industrial. However, First Insurance Co is 1.5 times less risky than Powertech Industrial. It trades about 0.27 of its potential returns per unit of risk. Powertech Industrial Co is currently generating about -0.19 per unit of risk. If you would invest  2,525  in First Insurance Co on December 30, 2024 and sell it today you would earn a total of  530.00  from holding First Insurance Co or generate 20.99% return on investment over 90 days.

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

First Insurance Co  vs.  Powertech Industrial Co

First Insurance

Risk-Adjusted Performance

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.

Powertech Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Powertech Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with First Insurance and Powertech Industrial

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

The idea behind First Insurance Co and Powertech Industrial 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.