Correlation Between Air Link and Premier Insurance

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

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

Diversification Opportunities for Air Link and Premier Insurance

-0.2

Correlation Coefficient

Air Link  Premier Insurance

Good diversification

The 3 months correlation between Air and Premier is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Air Link Communication and Premier Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Insurance and Air Link 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 Air Link Communication are associated (or correlated) with Premier Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Insurance has no effect on the direction of Air Link i.e., Air Link and Premier Insurance go up and down completely randomly.

Pair Corralation between Air Link and Premier Insurance

Assuming the 90 days trading horizon Air Link Communication is expected to under-perform the Premier Insurance. In addition to that, Air Link is 1.53 times more volatile than Premier Insurance. It trades about -0.18 of its total potential returns per unit of risk. Premier Insurance is currently generating about -0.14 per unit of volatility. If you would invest  551.00  in Premier Insurance on October 26, 2024 and sell it today you would lose (28.00) from holding Premier Insurance or give up 5.08% of portfolio value over 90 days.

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

Air Link Communication  vs.  Premier Insurance

Air Link Communication

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Link Communication are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Air Link disclosed solid returns over the last few months and may actually be approaching a breakup point.

Premier Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premier Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Air Link and Premier Insurance

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

The idea behind Air Link Communication and Premier Insurance 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.