Correlation Between Alumina and Hiscox

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

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

Diversification Opportunities for Alumina and Hiscox

-0.51

Correlation Coefficient

Alumina  Hiscox

Excellent diversification

The 3 months correlation between Alumina and Hiscox is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Alumina Limited and Hiscox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hiscox and Alumina 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 Alumina Limited are associated (or correlated) with Hiscox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hiscox has no effect on the direction of Alumina i.e., Alumina and Hiscox go up and down completely randomly.

Pair Corralation between Alumina and Hiscox

If you would invest  111.00  in Alumina Limited on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Alumina Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Alumina Limited  vs.  Hiscox

Alumina Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alumina Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Alumina is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Hiscox

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hiscox has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Hiscox is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alumina and Hiscox

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

The idea behind Alumina Limited and Hiscox 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.