Correlation Between AIICO INSURANCE and ABC TRANSPORT

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

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

Diversification Opportunities for AIICO INSURANCE and ABC TRANSPORT

-0.3

Correlation Coefficient

AIICO INSURANCE  ABC TRANSPORT

Very good diversification

The 3 months correlation between AIICO and ABC is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding AIICO INSURANCE PLC and ABC TRANSPORT PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABC TRANSPORT PLC and AIICO 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 AIICO INSURANCE PLC are associated (or correlated) with ABC TRANSPORT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABC TRANSPORT PLC has no effect on the direction of AIICO INSURANCE i.e., AIICO INSURANCE and ABC TRANSPORT go up and down completely randomly.

Pair Corralation between AIICO INSURANCE and ABC TRANSPORT

Assuming the 90 days trading horizon AIICO INSURANCE PLC is expected to generate 0.92 times more return on investment than ABC TRANSPORT. However, AIICO INSURANCE PLC is 1.09 times less risky than ABC TRANSPORT. It trades about 0.18 of its potential returns per unit of risk. ABC TRANSPORT PLC is currently generating about -0.05 per unit of risk. If you would invest  115.00  in AIICO INSURANCE PLC on October 24, 2024 and sell it today you would earn a total of  56.00  from holding AIICO INSURANCE PLC or generate 48.7% return on investment over 90 days.

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

AIICO INSURANCE PLC  vs.  ABC TRANSPORT PLC

AIICO INSURANCE PLC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AIICO INSURANCE PLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, AIICO INSURANCE showed solid returns over the last few months and may actually be approaching a breakup point.

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 unfluctuating 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.

Pair Trading with AIICO INSURANCE and ABC TRANSPORT

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

The idea behind AIICO INSURANCE PLC and ABC TRANSPORT 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.