Correlation Between AIICO INSURANCE and DEAP CAPITAL

Can any of the company-specific risk be diversified away by investing in both AIICO INSURANCE and DEAP CAPITAL 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 DEAP CAPITAL 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 DEAP CAPITAL MANAGEMENT, you can compare the effects of market volatilities on AIICO INSURANCE and DEAP CAPITAL 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 DEAP CAPITAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIICO INSURANCE and DEAP CAPITAL.

Diversification Opportunities for AIICO INSURANCE and DEAP CAPITAL

0.28

Correlation Coefficient

AIICO INSURANCE  DEAP CAPITAL

Modest diversification

The 3 months correlation between AIICO and DEAP is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding AIICO INSURANCE PLC and DEAP CAPITAL MANAGEMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DEAP CAPITAL MANAGEMENT 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 DEAP CAPITAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DEAP CAPITAL MANAGEMENT has no effect on the direction of AIICO INSURANCE i.e., AIICO INSURANCE and DEAP CAPITAL go up and down completely randomly.

Pair Corralation between AIICO INSURANCE and DEAP CAPITAL

Assuming the 90 days trading horizon AIICO INSURANCE is expected to generate 1.31 times less return on investment than DEAP CAPITAL. But when comparing it to its historical volatility, AIICO INSURANCE PLC is 1.57 times less risky than DEAP CAPITAL. It trades about 0.08 of its potential returns per unit of risk. DEAP CAPITAL MANAGEMENT is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  69.00  in DEAP CAPITAL MANAGEMENT on September 13, 2024 and sell it today you would earn a total of  45.00  from holding DEAP CAPITAL MANAGEMENT or generate 65.22% return on investment over 90 days.

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

AIICO INSURANCE PLC  vs.  DEAP CAPITAL MANAGEMENT

AIICO INSURANCE PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AIICO INSURANCE PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, AIICO INSURANCE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

DEAP CAPITAL MANAGEMENT

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DEAP CAPITAL MANAGEMENT are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, DEAP CAPITAL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AIICO INSURANCE and DEAP CAPITAL

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

The idea behind AIICO INSURANCE PLC and DEAP CAPITAL MANAGEMENT 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.