Correlation Between First Insurance and Shanghai Commercial

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

Diversification Opportunities for First Insurance and Shanghai Commercial

0.72

Correlation Coefficient

First Insurance  Shanghai Commercial

Poor diversification

The 3 months correlation between First and Shanghai is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding First Insurance Co and Shanghai Commercial Savings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Commercial 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 Shanghai Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Commercial has no effect on the direction of First Insurance i.e., First Insurance and Shanghai Commercial go up and down completely randomly.

Pair Corralation between First Insurance and Shanghai Commercial

Assuming the 90 days trading horizon First Insurance Co is expected to generate 1.26 times more return on investment than Shanghai Commercial. However, First Insurance is 1.26 times more volatile than Shanghai Commercial Savings. It trades about 0.27 of its potential returns per unit of risk. Shanghai Commercial Savings is currently generating about 0.23 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

First Insurance Co  vs.  Shanghai Commercial Savings

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.

Shanghai Commercial

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Commercial Savings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shanghai Commercial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Insurance and Shanghai Commercial

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

The idea behind First Insurance Co and Shanghai Commercial Savings 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.