Correlation Between ABC TRANSPORT and AIICO INSURANCE

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

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

Diversification Opportunities for ABC TRANSPORT and AIICO INSURANCE

-0.33

Correlation Coefficient

ABC TRANSPORT  AIICO INSURANCE

Very good diversification

The 3 months correlation between ABC and AIICO is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding ABC TRANSPORT PLC 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 ABC TRANSPORT 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 ABC TRANSPORT PLC 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 ABC TRANSPORT i.e., ABC TRANSPORT and AIICO INSURANCE go up and down completely randomly.

Pair Corralation between ABC TRANSPORT and AIICO INSURANCE

Assuming the 90 days trading horizon ABC TRANSPORT PLC is expected to under-perform the AIICO INSURANCE. In addition to that, ABC TRANSPORT is 1.1 times more volatile than AIICO INSURANCE PLC. It trades about -0.05 of its total potential returns per unit of risk. AIICO INSURANCE PLC is currently generating about 0.18 per unit of volatility. If you would invest  120.00  in AIICO INSURANCE PLC on October 25, 2024 and sell it today you would earn a total of  57.00  from holding AIICO INSURANCE PLC or generate 47.5% return on investment over 90 days.

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

ABC TRANSPORT PLC  vs.  AIICO INSURANCE PLC

ABC TRANSPORT PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABC TRANSPORT PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

AIICO INSURANCE PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AIICO INSURANCE PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, AIICO INSURANCE showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ABC TRANSPORT and AIICO INSURANCE

The main advantage of trading using opposite ABC TRANSPORT and AIICO INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABC TRANSPORT 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 ABC TRANSPORT PLC 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.