Correlation Between AIICO INSURANCE and IKEJA HOTELS

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

Diversification Opportunities for AIICO INSURANCE and IKEJA HOTELS

0.54

Correlation Coefficient

AIICO INSURANCE  IKEJA HOTELS

Very weak diversification

The 3 months correlation between AIICO and IKEJA is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding AIICO INSURANCE PLC and IKEJA HOTELS PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IKEJA HOTELS 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 IKEJA HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IKEJA HOTELS PLC has no effect on the direction of AIICO INSURANCE i.e., AIICO INSURANCE and IKEJA HOTELS go up and down completely randomly.

Pair Corralation between AIICO INSURANCE and IKEJA HOTELS

Assuming the 90 days trading horizon AIICO INSURANCE PLC is expected to generate 0.74 times more return on investment than IKEJA HOTELS. However, AIICO INSURANCE PLC is 1.36 times less risky than IKEJA HOTELS. It trades about 0.04 of its potential returns per unit of risk. IKEJA HOTELS PLC is currently generating about -0.02 per unit of risk. If you would invest  149.00  in AIICO INSURANCE PLC on December 25, 2024 and sell it today you would earn a total of  9.00  from holding AIICO INSURANCE PLC or generate 6.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

AIICO INSURANCE PLC  vs.  IKEJA HOTELS PLC

AIICO INSURANCE PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AIICO INSURANCE PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, AIICO INSURANCE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

IKEJA HOTELS PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days IKEJA HOTELS PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with AIICO INSURANCE and IKEJA HOTELS

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

The idea behind AIICO INSURANCE PLC and IKEJA HOTELS 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.