Correlation Between First Insurance and Capital Futures

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

Diversification Opportunities for First Insurance and Capital Futures

0.88

Correlation Coefficient

First Insurance  Capital Futures

Very poor diversification

The 3 months correlation between First and Capital is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding First Insurance Co and Capital Futures Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Futures Corp 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 Capital Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Futures Corp has no effect on the direction of First Insurance i.e., First Insurance and Capital Futures go up and down completely randomly.

Pair Corralation between First Insurance and Capital Futures

Assuming the 90 days trading horizon First Insurance Co is expected to generate 1.21 times more return on investment than Capital Futures. However, First Insurance is 1.21 times more volatile than Capital Futures Corp. It trades about 0.09 of its potential returns per unit of risk. Capital Futures Corp is currently generating about 0.05 per unit of risk. If you would invest  1,825  in First Insurance Co on September 20, 2024 and sell it today you would earn a total of  660.00  from holding First Insurance Co or generate 36.16% 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.  Capital Futures Corp

First Insurance

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Insurance Co are ranked lower than 14 (%) 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 January 2025.

Capital Futures Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Futures Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Capital Futures 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 Capital Futures

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

The idea behind First Insurance Co and Capital Futures Corp 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.