Correlation Between Trade Van and Central Reinsurance

Can any of the company-specific risk be diversified away by investing in both Trade Van and Central Reinsurance 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 Trade Van and Central Reinsurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Trade Van Information Services and Central Reinsurance Corp, you can compare the effects of market volatilities on Trade Van and Central Reinsurance 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 Trade Van with a short position of Central Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trade Van and Central Reinsurance.

Diversification Opportunities for Trade Van and Central Reinsurance

0.26

Correlation Coefficient

Trade Van  Central Reinsurance

Modest diversification

The 3 months correlation between Trade and Central is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Trade Van Information Services and Central Reinsurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Reinsurance Corp and Trade Van 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 Trade Van Information Services are associated (or correlated) with Central Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Reinsurance Corp has no effect on the direction of Trade Van i.e., Trade Van and Central Reinsurance go up and down completely randomly.

Pair Corralation between Trade Van and Central Reinsurance

Assuming the 90 days trading horizon Trade Van Information Services is expected to generate 1.06 times more return on investment than Central Reinsurance. However, Trade Van is 1.06 times more volatile than Central Reinsurance Corp. It trades about 0.18 of its potential returns per unit of risk. Central Reinsurance Corp is currently generating about 0.03 per unit of risk. If you would invest  7,420  in Trade Van Information Services on September 17, 2024 and sell it today you would earn a total of  860.00  from holding Trade Van Information Services or generate 11.59% return on investment over 90 days.

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

Trade Van Information Services  vs.  Central Reinsurance Corp

Trade Van Information

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trade Van Information Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Trade Van may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Central Reinsurance Corp

Risk-Adjusted Performance

2 of 100

Weak

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

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

The idea behind Trade Van Information Services and Central Reinsurance 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.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.