Correlation Between Arpico Insurance and Asian Hotels

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

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

Diversification Opportunities for Arpico Insurance and Asian Hotels

0.34

Correlation Coefficient

Arpico Insurance  Asian Hotels

Weak diversification

The 3 months correlation between Arpico and Asian is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Arpico Insurance and Asian Hotels and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asian Hotels and Arpico 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 Arpico Insurance are associated (or correlated) with Asian Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asian Hotels has no effect on the direction of Arpico Insurance i.e., Arpico Insurance and Asian Hotels go up and down completely randomly.

Pair Corralation between Arpico Insurance and Asian Hotels

Assuming the 90 days trading horizon Arpico Insurance is expected to generate 1.53 times more return on investment than Asian Hotels. However, Arpico Insurance is 1.53 times more volatile than Asian Hotels and. It trades about 0.1 of its potential returns per unit of risk. Asian Hotels and is currently generating about 0.13 per unit of risk. If you would invest  2,190  in Arpico Insurance on September 16, 2024 and sell it today you would earn a total of  240.00  from holding Arpico Insurance or generate 10.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	70.0%
Values	Daily Returns

Arpico Insurance  vs.  Asian Hotels and

Arpico Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arpico Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Arpico Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Asian Hotels

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asian Hotels and are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Asian Hotels sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arpico Insurance and Asian Hotels

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

The idea behind Arpico Insurance and Asian Hotels and 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.