Correlation Between Ma Kuang and First Insurance

Can any of the company-specific risk be diversified away by investing in both Ma Kuang and First Insurance 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 Ma Kuang and First Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ma Kuang Healthcare and First Insurance Co, you can compare the effects of market volatilities on Ma Kuang and First Insurance 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 Ma Kuang with a short position of First Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ma Kuang and First Insurance.

Diversification Opportunities for Ma Kuang and First Insurance

-0.52

Correlation Coefficient

Ma Kuang  First Insurance

Excellent diversification

The 3 months correlation between 4139 and First is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ma Kuang Healthcare and First Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Insurance and Ma Kuang 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 Ma Kuang Healthcare are associated (or correlated) with First Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Insurance has no effect on the direction of Ma Kuang i.e., Ma Kuang and First Insurance go up and down completely randomly.

Pair Corralation between Ma Kuang and First Insurance

Assuming the 90 days trading horizon Ma Kuang Healthcare is expected to under-perform the First Insurance. In addition to that, Ma Kuang is 1.12 times more volatile than First Insurance Co. It trades about -0.08 of its total potential returns per unit of risk. First Insurance Co is currently generating about 0.25 per unit of volatility. If you would invest  2,405  in First Insurance Co on September 15, 2024 and sell it today you would earn a total of  110.00  from holding First Insurance Co or generate 4.57% return on investment over 90 days.

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

Ma Kuang Healthcare  vs.  First Insurance Co

Ma Kuang Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ma Kuang Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ma Kuang is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with Ma Kuang and First Insurance

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

The idea behind Ma Kuang Healthcare and First Insurance Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.