Correlation Between Computer Age and General Insurance

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

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

Diversification Opportunities for Computer Age and General Insurance

0.76

Correlation Coefficient

Computer Age  General Insurance

Poor diversification

The 3 months correlation between Computer and General is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Computer Age Management and General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Insurance and Computer Age 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 Computer Age Management are associated (or correlated) with General Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Insurance has no effect on the direction of Computer Age i.e., Computer Age and General Insurance go up and down completely randomly.

Pair Corralation between Computer Age and General Insurance

Assuming the 90 days trading horizon Computer Age Management is expected to generate 1.14 times more return on investment than General Insurance. However, Computer Age is 1.14 times more volatile than General Insurance. It trades about 0.11 of its potential returns per unit of risk. General Insurance is currently generating about 0.11 per unit of risk. If you would invest  444,573  in Computer Age Management on September 20, 2024 and sell it today you would earn a total of  68,547  from holding Computer Age Management or generate 15.42% return on investment over 90 days.

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

Computer Age Management  vs.  General Insurance

Computer Age Management

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Computer Age Management are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Computer Age unveiled solid returns over the last few months and may actually be approaching a breakup point.

General Insurance

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Computer Age and General Insurance

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

The idea behind Computer Age Management and General 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.