Correlation Between First Insurance and Great China

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

Diversification Opportunities for First Insurance and Great China

-0.01

Correlation Coefficient

First Insurance  Great China

Good diversification

The 3 months correlation between First and Great is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding First Insurance Co and Great China Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great China Metal 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 Great China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great China Metal has no effect on the direction of First Insurance i.e., First Insurance and Great China go up and down completely randomly.

Pair Corralation between First Insurance and Great China

Assuming the 90 days trading horizon First Insurance Co is expected to generate 2.26 times more return on investment than Great China. However, First Insurance is 2.26 times more volatile than Great China Metal. It trades about 0.21 of its potential returns per unit of risk. Great China Metal is currently generating about 0.0 per unit of risk. If you would invest  2,255  in First Insurance Co on September 15, 2024 and sell it today you would earn a total of  260.00  from holding First Insurance Co or generate 11.53% return on investment over 90 days.

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

First Insurance Co  vs.  Great China Metal

First Insurance

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Insurance Co are ranked lower than 16 (%) 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.

Great China Metal

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind First Insurance Co and Great China Metal 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.