Correlation Between Azorim Investment and Libra Insurance

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

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

Diversification Opportunities for Azorim Investment and Libra Insurance

0.9

Correlation Coefficient

Azorim Investment  Libra Insurance

Almost no diversification

The 3 months correlation between Azorim and Libra is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Azorim Investment Development and Libra Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Libra Insurance and Azorim Investment 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 Azorim Investment Development are associated (or correlated) with Libra Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Libra Insurance has no effect on the direction of Azorim Investment i.e., Azorim Investment and Libra Insurance go up and down completely randomly.

Pair Corralation between Azorim Investment and Libra Insurance

Assuming the 90 days trading horizon Azorim Investment is expected to generate 5.39 times less return on investment than Libra Insurance. But when comparing it to its historical volatility, Azorim Investment Development is 1.8 times less risky than Libra Insurance. It trades about 0.15 of its potential returns per unit of risk. Libra Insurance is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest  73,377  in Libra Insurance on September 15, 2024 and sell it today you would earn a total of  27,023  from holding Libra Insurance or generate 36.83% return on investment over 90 days.

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

Azorim Investment Development  vs.  Libra Insurance

Azorim Investment

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Azorim Investment Development are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Azorim Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Libra Insurance

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Libra Insurance are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Libra Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Azorim Investment and Libra Insurance

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

The idea behind Azorim Investment Development and Libra 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.