Correlation Between ABBEY MORTGAGE and AIICO INSURANCE

Can any of the company-specific risk be diversified away by investing in both ABBEY MORTGAGE and AIICO 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 ABBEY MORTGAGE and AIICO INSURANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ABBEY MORTGAGE BANK and AIICO INSURANCE PLC, you can compare the effects of market volatilities on ABBEY MORTGAGE and AIICO 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 ABBEY MORTGAGE with a short position of AIICO INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABBEY MORTGAGE and AIICO INSURANCE.

Diversification Opportunities for ABBEY MORTGAGE and AIICO INSURANCE

0.33

Correlation Coefficient

ABBEY MORTGAGE  AIICO INSURANCE

Weak diversification

The 3 months correlation between ABBEY and AIICO is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding ABBEY MORTGAGE BANK and AIICO INSURANCE PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIICO INSURANCE PLC and ABBEY MORTGAGE 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 ABBEY MORTGAGE BANK are associated (or correlated) with AIICO INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIICO INSURANCE PLC has no effect on the direction of ABBEY MORTGAGE i.e., ABBEY MORTGAGE and AIICO INSURANCE go up and down completely randomly.

Pair Corralation between ABBEY MORTGAGE and AIICO INSURANCE

Assuming the 90 days trading horizon ABBEY MORTGAGE is expected to generate 1.78 times less return on investment than AIICO INSURANCE. In addition to that, ABBEY MORTGAGE is 1.23 times more volatile than AIICO INSURANCE PLC. It trades about 0.06 of its total potential returns per unit of risk. AIICO INSURANCE PLC is currently generating about 0.14 per unit of volatility. If you would invest  110.00  in AIICO INSURANCE PLC on October 7, 2024 and sell it today you would earn a total of  62.00  from holding AIICO INSURANCE PLC or generate 56.36% return on investment over 90 days.

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

ABBEY MORTGAGE BANK  vs.  AIICO INSURANCE PLC

ABBEY MORTGAGE BANK

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ABBEY MORTGAGE BANK are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, ABBEY MORTGAGE exhibited solid returns over the last few months and may actually be approaching a breakup point.

AIICO INSURANCE PLC

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AIICO INSURANCE PLC are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, AIICO INSURANCE showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ABBEY MORTGAGE and AIICO INSURANCE

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

The idea behind ABBEY MORTGAGE BANK and AIICO INSURANCE PLC 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.