Correlation Between Adamjee Insurance and Premier Insurance

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

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

Diversification Opportunities for Adamjee Insurance and Premier Insurance

0.38

Correlation Coefficient

Adamjee Insurance  Premier Insurance

Weak diversification

The 3 months correlation between Adamjee and Premier is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Adamjee Insurance and Premier Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Insurance and Adamjee 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 Adamjee Insurance are associated (or correlated) with Premier Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Insurance has no effect on the direction of Adamjee Insurance i.e., Adamjee Insurance and Premier Insurance go up and down completely randomly.

Pair Corralation between Adamjee Insurance and Premier Insurance

Assuming the 90 days trading horizon Adamjee Insurance is expected to generate 0.65 times more return on investment than Premier Insurance. However, Adamjee Insurance is 1.55 times less risky than Premier Insurance. It trades about 0.0 of its potential returns per unit of risk. Premier Insurance is currently generating about -0.14 per unit of risk. If you would invest  4,707  in Adamjee Insurance on December 5, 2024 and sell it today you would lose (32.00) from holding Adamjee Insurance or give up 0.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Adamjee Insurance  vs.  Premier Insurance

Adamjee Insurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Adamjee Insurance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Adamjee Insurance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Premier Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Premier Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Adamjee Insurance and Premier Insurance

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

The idea behind Adamjee Insurance and Premier Insurance 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.