Correlation Between First Insurance and RiTdisplay Corp

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

Diversification Opportunities for First Insurance and RiTdisplay Corp

0.82

Correlation Coefficient

First Insurance  RiTdisplay Corp

Very poor diversification

The 3 months correlation between First and RiTdisplay is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding First Insurance Co and RiTdisplay Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RiTdisplay 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 RiTdisplay Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RiTdisplay Corp has no effect on the direction of First Insurance i.e., First Insurance and RiTdisplay Corp go up and down completely randomly.

Pair Corralation between First Insurance and RiTdisplay Corp

Assuming the 90 days trading horizon First Insurance is expected to generate 2.81 times less return on investment than RiTdisplay Corp. But when comparing it to its historical volatility, First Insurance Co is 4.43 times less risky than RiTdisplay Corp. It trades about 0.36 of its potential returns per unit of risk. RiTdisplay Corp is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  4,130  in RiTdisplay Corp on September 12, 2024 and sell it today you would earn a total of  990.00  from holding RiTdisplay Corp or generate 23.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

First Insurance Co  vs.  RiTdisplay Corp

First Insurance

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Insurance Co are ranked lower than 21 (%) 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.

RiTdisplay Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RiTdisplay Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, RiTdisplay Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Insurance and RiTdisplay Corp

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

The idea behind First Insurance Co and RiTdisplay 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.