Correlation Between AIICO INSURANCE and WEMA BANK

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

Diversification Opportunities for AIICO INSURANCE and WEMA BANK

0.81

Correlation Coefficient

AIICO INSURANCE  WEMA BANK

Very poor diversification

The 3 months correlation between AIICO and WEMA is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding AIICO INSURANCE PLC and WEMA BANK PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEMA BANK 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 WEMA BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEMA BANK PLC has no effect on the direction of AIICO INSURANCE i.e., AIICO INSURANCE and WEMA BANK go up and down completely randomly.

Pair Corralation between AIICO INSURANCE and WEMA BANK

Assuming the 90 days trading horizon AIICO INSURANCE PLC is expected to generate 1.66 times more return on investment than WEMA BANK. However, AIICO INSURANCE is 1.66 times more volatile than WEMA BANK PLC. It trades about 0.35 of its potential returns per unit of risk. WEMA BANK PLC is currently generating about 0.37 per unit of risk. If you would invest  121.00  in AIICO INSURANCE PLC on October 10, 2024 and sell it today you would earn a total of  50.00  from holding AIICO INSURANCE PLC or generate 41.32% return on investment over 90 days.

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

AIICO INSURANCE PLC  vs.  WEMA BANK 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 fragile fundamental indicators, AIICO INSURANCE showed solid returns over the last few months and may actually be approaching a breakup point.

WEMA BANK PLC

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WEMA BANK PLC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, WEMA BANK displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AIICO INSURANCE and WEMA BANK

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

The idea behind AIICO INSURANCE PLC and WEMA BANK 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.