Correlation Between First Insurance and Buima

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

Diversification Opportunities for First Insurance and Buima

-0.28

Correlation Coefficient

First Insurance  Buima

Very good diversification

The 3 months correlation between First and Buima is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding First Insurance Co and Buima Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buima Group 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 Buima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buima Group has no effect on the direction of First Insurance i.e., First Insurance and Buima go up and down completely randomly.

Pair Corralation between First Insurance and Buima

Assuming the 90 days trading horizon First Insurance Co is expected to generate 0.24 times more return on investment than Buima. However, First Insurance Co is 4.13 times less risky than Buima. It trades about -0.17 of its potential returns per unit of risk. Buima Group is currently generating about -0.14 per unit of risk. If you would invest  2,555  in First Insurance Co on October 12, 2024 and sell it today you would lose (85.00) from holding First Insurance Co or give up 3.33% of portfolio value over 90 days.

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

First Insurance Co  vs.  Buima Group

First Insurance

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Insurance Co are ranked lower than 13 (%) 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.

Buima Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Buima Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Buima 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 Buima

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

The idea behind First Insurance Co and Buima Group 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .